Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266114 
Year of Publication: 
2022
Series/Report no.: 
Staff Report No. 1030
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Two activists with correlated private positions in a firm's stock, trade sequentially before simultaneously exerting effort that determines the firm's value. We document the existence of a novel linear equilibrium in which an activist's trades have positive sensitivity to her block size, but such orders are not zero on average: the leader activist manipulates the price to induce the follower to acquire a larger position and thus add more value. We examine the implications of this equilibrium for market outcomes and discuss its connection with the prominent phenomenon of "wolf-pack" activism-multiple hedge funds engaging in parallel with a target firm. We also explore the possibility of other equilibria where the activists trade against their initial positions.
Subjects: 
activism
insider trading
noisy signaling
price manipulation
hedge funds
JEL: 
D82
G14
G23
Document Type: 
Working Paper

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