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Title: Investor Interest and Hedge Fund Returns

Author(s): Tarun Ramadorai

Publication Date: November 2010

Keyword(s): capacity constraints, flows, hedge funds and information

Programme Area(s): Financial Economics

Abstract: Employing a new dataset of over 9,000 expressed demands for over 700 hedge funds from a secondary market for hedge funds, this paper finds evidence suggesting that hedge fund investors rationally anticipate future hedge fund performance. Both buy and sell indications of interest arrive following periods of fund outperformance. Buy (sell) indications have some forecasting power for increases (decreases) in hedge fund performance, over and above other well-known forecasting variables. This information in investor demand co-exists with the presence of capacity constraints in hedge fund returns, confirming two main assumptions of Berk and Green (2004).

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Bibliographic Reference

Ramadorai, T. 2010. 'Investor Interest and Hedge Fund Returns'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8092