Stock Price Manipulation by Hedge Funds Itzhak Ben-David Fisher College of Business, The Ohio State University Francesco Franzoni Swiss Finance Institute and University of Lugano Augustin Landier Toulouse School of Economics Rabih Moussawi Wharton Research Data Services, The Wharton School, University of Pennsylvania PRELIMINARY AND INCOMPLETE January 2011 Abstract We find evidence for significant price manipulation at the stock level by hedge funds at critical report dates. We document that stocks that are held by hedge funds experience returns higher by 0.18% on the last day of the quarter and a partial reversal in the following day. Using intraday data, we show that a significant part of the return is earned during the last minutes of the last day of the month, at an increasing rate towards the closing bell. This evidence is consistent with the incentive of hedge funds to inflate their monthly performance by putting price pressure on their existing holdings. Higher manipulations occur for funds which have higher incentives to improve their ranking relative to their peers and lower costs of doing so. _____________________ * We thank Tarun Ramadorai for helpful comments.