Marco Elia

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Working Papers 

"What Causes Passive Hedge Funds to Become Activists?"

About 20% of the total activist hedge funds’ positions are initiated as passive holdings, that is without the intention of changing or influencing the control of the target firms. At some point, however, the hedge funds change their filing status and switch to activism. My paper investigates what triggers this switch. I hypothesize and find that hedge funds see the purchase price of their passive positions as a reference point. When hedge funds are suffering losses on these positions, they are more likely to switch to become activists, even after controlling for the firms’ underperformance. This study presents new evidence about what causes hedge fund activism.


American Finance Association (AFA)                                                                                    2019  
Annual Meeting       

China International Conference in Finance (CICF)                2019
Annual Meeting

University of Technology Sydney                        2019
American Finance Association (AFA)                                                                                    2018
PhD Poster Session    

Financial Management Association (FMA)                                                                         2017
Doctoral Consortium & Special PhD Student Paper Presentation          

European Finance Association (EFA)                                                                                    2017
Doctoral Tutorial                                                                            

Financial Management Association (FMA)                                                                         2017                                                                          
European Conference
Drexel University                                                                                                                        2016
Brown Bag Seminar            


"Coordination by Activist Hedge Funds" (with Naveen D. Daniel)

If the frequency with which an institution (say, T. Rowe Price) invests in firms targeted by a given activist hedge fund (say, Starboard) is much higher than the frequency with which it invests in firms targeted by other activists (non-Starboard), we label the institution as coordinating with the activist. Using this procedure, we identify all institutions that coordinate with every activist. Our contribution is to document that such coordination is pervasive and is mutually beneficial. In nearly two-thirds of the campaigns, there is coordination between the activist and institutional investors. Coordination is more likely in large firms where the activists would not have sufficient capital to build a large stake. Activist hedge funds that coordinate with other institutional shareholders are more successful in their activism as reflected in higher abnormal returns over the duration of the campaigns. We attribute causation by instrumenting for coordination with the geographic proximity between the activist and the institutional investors.  

"Opportunistic  Activism" (with Naveen D. Daniel)

The average announcement return to hedge fund activism is around 5%. Thus, activists that want to inflate their reported returns have incentives to initiate activism in target firms before the end of the reporting period. Our contribution is to document that activists engage in such opportunistic activism. Consistent with this, we find that activists are more likely to start their campaigns just before the end of the quarter. This heightened activity cannot be explained by increased news flow at the end of the quarter. In contrast to the typical positive market reaction to activist initiation, reaction to opportunistic activism is virtually zero. This is suggestive of activists initiating campaigns without completing their research on firms, which were potentially targeted for activism in the following quarter. We find evidence consistent with such pulled-forward activism.