Capacity constraints, investor information, and hedge fund returns

Tarun Ramadorai

Journal of Financial Economics, 2013, vol. 107, issue 2, 401-416

Abstract: To identify capacity constraints in hedge funds and simultaneously gauge how well-informed hedge fund investors are, we need measures of investor demand that do not affect deployed hedge fund assets. Using new data on investor interest from a secondary market for hedge funds, this paper verifies the existence of capacity constraints in hedge funds. There is more mixed evidence on the information available to hedge fund investors. Buy and sell indications arrive following fund outperformance. While buy indications have little incremental power to predict hedge fund performance over and above well-known forecasting variables, sell indications do somewhat better.

Keywords: Hedge funds; Capacity constraints; Information; Flows (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:107:y:2013:i:2:p:401-416

DOI: 10.1016/j.jfineco.2012.08.020

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