Investor Interest and Hedge Fund Returns
Speaker
Abstract
| Employing a new dataset of over 8,000 expressed demands for over 700 hedge funds from a secondary market for hedge funds, this paper finds evidence that hedge fund investors rationally anticipate future hedge fund performance. Both demand and supply indications of interest arrive following periods of fund outperformance. Demand (supply) indications forecast increases (decreases) in strategy-adjusted hedge fund returns over the subsequent year, and large dollar-amount indications are better forecasters than small-dollar amount indications. Indication-based capital allocation strategies are potentially useful to real-world investors: they yield high alphas when implemented using calendar-time portfolios. |
| The Erasmus Finance Seminar is jointly sponsored by ERIM and the Tinbergen Institute. |
| Contact information: |
| Viorel Roscovan |
