The Journal of Alternative Investments

Retail Hedge Funds

2024-02-21T13:46:31+00:00

We use a novel fund-level measure to identify 877 retail hedge funds. On average, retail funds do not underperform, either on an absolute basis or relative to institutional funds. In the cross-section, 14.3% of retail funds produce positive alpha and performance is predictable: funds with low systematic risk outperform, and poor performing funds persistently underperform. Turning to investor behavior, retail investors are "hot money" and are more likely to divest following poor performance. They do not exhibit selection ability but are not "dumb money," and they also chase alpha and ignore (or avoid) common factor returns.

Speculation in agricultural commodity markets: Implications for returns and volatility

2025-07-09T04:20:16+00:00

Financial speculation on agricultural commodities has been the subject of many academic studies. Because of theoretical uncertainties are well practical considerations related to the measure of speculation, some contradictory findings remain. In this paper, contrary to previous studies which focus on one or a few speculation proxies, we investigate a large set of nine direct speculation measures on a unified sample of agricultural commodity futures (grains and softs). Using data from 2006 to 2022, we find that speculation reduces subsequent volatility on many commodities when using the Working's T, the speculative open interest, and the speculative intensity to measure speculation. However, when measured using the total volume-to-open interest ratio, speculation is associated with higher subsequent volatility for all commodities but soybeans. We further discuss these contradictory findings and attempt to understand their causes.

Why new venture investors overvalue some investment proposals and undervalue others, an experimental evidence

2025-07-27T10:19:05+00:00

New venture investment decisions reflect misvaluations as many deserving proposals are rejected, while most invested proposals fail to provide the required financial returns. This suggests that investors overvalue and undervalue investment proposals. We have used the arguments of dual process theory and salience theory to explain the cause of misvaluations. An experimental setup is used where the treated group is given time constraints to make the investment. Results show that investors under time constraints overvalue investment proposals, while reference-based comparison of salient information signals results in undervaluation. Results further show a significant impact of time constraints on the reference for comparison of proposals. Investors under time constraints consider only the last proposal as a reference to compare salient information signals, in contrast, they consider information from multiple previous proposals in the absence of time constraints. This study provides the specific source of misvaluations as per the context of overvaluation and undervaluation of new venture investment proposals.

From hype to interconnection: Investor attention and cryptocurrency spillovers

2025-06-04T10:32:11+00:00

The growth of cryptocurrencies has made them a crucial part of the modern financial sector. Supported by technological advancements, the interconnectedness of cryptocurrencies has the potential to become a source of systemic risk, raising concerns about spillover effects. This study examines how investor attention influences spillover dynamics among major cryptocurrencies. Using a time-varying parameter vector autoregression (TVP-VAR) model and OLS regression, we analyse the spillover structure of cryptocurrencies from 2020 to 2024. The results reveal strong interconnectedness, with Bitcoin, Ethereum, and Binance Coin acting as net transmitters of shocks, while Dogecoin, Solana, Ripple, and Cardano are net receivers. Investor attention generally reduces spillovers but intensifies them at extreme levels. Interestingly, investor attention impacts is heterogeneous effects across assets. This study contributes to behavioral finance by uncovering how investor sentiment affects cryptocurrency interconnectedness and provides practical insights for investors and regulators, particularly regarding portfolio diversification and risk management during periods of heightened public interest.

The Golden Calendar: Golden Time for Glittering Gold Returns

2025-08-31T07:56:08+00:00

The study evaluates the performance of calendar anomalies-based active investment strategies for the gold markets. It uses daily Gold Prices per troy ounce in US Dollar (GP-USD) from January 01, 1980, to June 30, 2025, and Gold Prices per troy ounce in Indian Rupee (GP-INR) from August 01, 1994, to June 30, 2025. The study tests the presence of calendar anomalies like day-of-the-week, date-of-the-month, and month-of-the-year using dummy variable regression analysis. It also backtests the performance of investment strategies to exploit the calendar anomalies. The study finds day-of-the-week and month-of-the-year anomalies; however, it does not find a date-of-the-month anomaly in the US and Indian gold markets. Moreover, annualized returns of day, date and month portfolios are very similar, suggesting that the calendar anomalies-based investment strategies do not provide superior returns for a particular day, date or month in gold markets. The study concludes that calendar anomalies do not exist in the US and Indian gold markets.

Hedging against inflation: are listed infrastructure assets effective?

2025-08-10T05:35:52+00:00

In this paper we examine the inflation hedging potential of listed infrastructure. To do so, we determine the optimal portfolio allocation that minimizes the downside risk, for a given inflation-linked target return, using different partial lower moments as risk metrics. We simulate returns by a GARCH-copula model to flexibly allow for well-known return properties. We assess the potential of both an overall infrastructure index and sector-specific indices representing transportation, telecom and utilities. We find that listed infrastructure not only improves a portfolio’s inflation resilience but, in addition, also increases its expected return. This result might be particularly relevant for long-term, liability-driven investors such as pension funds and insurance companies.

The Value of a Not Yet Issued Priority Review Vouchers (NYIPRV)

2025-08-25T11:40:50+00:00

In this paper, we develop a model to value not yet issued priority review vouchers (NYIPRVs). Priority Review Vouchers (PRVs) are awarded by the United States Food and Drug Administration (FDA) to biotechnology and pharmaceutical companies. To qualify for a PRV, a company must successfully develop and receive a positive review for a new drug application (NDA), biologic, or countermeasure that the FDA has designated as a PRV candidate. The treatment must be innovative and target a rare pediatric disease, tropical disease, or a critical medical countermeasure. Once issued, a PRV becomes a liquid asset that can be bought and sold an unlimited number of times prior to its use for securing a priority review by the FDA for a new drug application. This liquidity makes PRVs a valuable source of non-dilutive capital for the initial holder. Contracts can be executed to transfer rights to PRVs that have not yet been issued, further enhancing their market potential. The ability to sell PRVs before issuance increases their attractiveness for biotech and pharmaceutical firms. We develop a model linking the market for transactions in expected PRVs to the existing PRV market, framing it as a contingent claim on PRVs as well as a spot market. We analyze specific spot and contingent transactions involving PRVs and conduct simulations to demonstrate how the model incorporates key factors influencing PRV values in both markets.