Returns of activist hedge funds

This study examines activist hedge fund transactions. Under the scope of this study, 1634 13D forms have been downloaded from the website of Securities and Exchange Commission (SEC) of USA. The performances of the companies on which activist transactions applied have been examined at different periods of time by looking at the returns before and after each activist transaction. Short and long term performance data of 574 different transactions has demonstrated that it is possible to beat S&P500 by imitating these transactions during the last 20 years. The study also demonstrated that activist hedge funds prefer companies showing poor performances during the preceding year of activist transaction. While relevant companies had negative returns since average nine days before the publication of the 13D form, positive abnormal returns have been observed after this date. Pre- and post-transaction returns of the stocks, which activist hedge funds invest, have been analyzied using different filters. While the short-term positive abnormal returns remains stable between 1994 and 2004, a slight downtrend has been experienced in the long term positive abnormal returns. Sectorally, the highest profits have been observed in finance and industrial products. The more frequent the transactions are, the higher profits the hedge funds gain on a certain stock. Activist hedge funds have derived the highest levels of profit from the companies which have market capitilazation between 100 million USD to 500 million USD and they have experienced the worst performances in the companies which have more than five billion USD market capitilazation.