Aggregate Hedge Fund Flows and Asset Returns

17 Pages Posted: 10 Aug 2008

See all articles by Ashley Wang

Ashley Wang

Board of Governors of the Federal Reserve System

Lu Zheng

University of California, Irvine - Paul Merage School of Business

Date Written: August 8, 2008

Abstract

Although significant efforts have been dedicated to studying the pattern of cash flows into individual hedge funds and to understanding how investors choose among different funds, little is known at the macro level about how hedge fund investors as a group respond to aggregate fund returns and market wide price movements. In this project, we intend to analyze the pattern in aggregate flows into the hedge fund sector. Specifically, we intend to address the following questions: first, do hedge fund investors as a group chase aggregate fund performance; second, can hedge fund investors as a group, time the market by moving money into (out of) hedge funds before they display high (low) aggregate returns; third, how do aggregate hedge fund flows relate to contemporaneous aggregate fund returns; fourth, how do aggregate hedge fund flows relate to market wide price movements of relevant asset classes; finally, how do hedge fund investors react to the perceived level of risk. It is important to understand these questions since the pattern in aggregate fund cash flows reveals correlated actions of hedge fund investors, which may have a cumulative effect on asset prices.

Keywords: Hedge Fund Flows, Asset Returns

JEL Classification: G10, G12

Suggested Citation

Wang, Ashley and Zheng, Lu, Aggregate Hedge Fund Flows and Asset Returns (August 8, 2008). Available at SSRN: https://ssrn.com/abstract=1213331 or http://dx.doi.org/10.2139/ssrn.1213331

Ashley Wang (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Lu Zheng

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States
9498248365 (Phone)

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