Flows, Price Pressure, and Hedge Fund Returns

Katja Ahoniemi, Petri Jylhä

Tutkimustuotos: LehtiartikkeliArticleScientificvertaisarvioitu

Abstrakti

The authors studied how capital flows affect hedge fund returns and found that funds with high inflows outperform funds with high outflows during the month of the flows. This immediate reaction, combined with feedback trading, gives rise to a cycle: Flows exert price pressure, this effect on returns induces more flows, and these flows cause further price pressure. The cycle is so strong that it takes two years for a full return reversal, and it contributes to the observed persistence in hedge fund performance. The impact of flows on returns has clear implications for performance evaluation: One-third of estimated hedge fund alphas are due to flows.
AlkuperäiskieliEnglanti
Sivut73-93
Sivumäärä21
JulkaisuFINANCIAL ANALYSTS JOURNAL
Vuosikerta70
Numero5
TilaJulkaistu - 2014
OKM-julkaisutyyppiA1 Julkaistu artikkeli, soviteltu

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