Despite their reputation for taking advantage of upsets in the markets, hedge funds wisely ran for the exit from stocks between 2007 and 2009, according to a report by Ohio State University’s Fisher College of Business Assistant Professor of Business Itzhak Ben-David. Ben-David conducted the study along with Rabih Moussawi of the Wharton School at the University of Pennsylvania and Francesco Franzoni of the Swiss Finance Institute and the University of Lugano.

The study found that hedge funds reduced their stock holdings about 10% in the second half of 2007, as the credit crisis began. Then, in the second half of 2008, the average fund scaled back its equity exposure by another 30%. By comparison, mutual funds scaled back their equity exposure dramatically less, about one-tenth of these pullbacks.

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