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This Academic paper which uses evidence from detailed hedge fund portfolio data was co-authored by Bastian von Beschwitz of Federal Reserve Board & Sandro Lunghi of Inalytics.

Using detailed data on the trades and portfolio holdings of long-short equity hedge funds, we examine the differences between trades related to long and short positions. We find that long buys and short sells are informed, but that long sells and short buys are uninformed. In fact, it is possible to generate significant alphas by taking the opposite trades to long sells and short buys implying that hedge funds close their positions too early and “leave money on the table”. Furthermore, while hedge funds trade on momentum when establishing both long and short positions, follow-up orders exhibit momentum for shorts and are contrarian for longs. We argue this comes from hedge funds’ desires to keep their position sizes stable.

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