The Supply and Demand of Alpha

Journal of Investment Management (JOIM), First Quarter 2011

Posted: 9 Apr 2011 Last revised: 13 Apr 2011

See all articles by Harry Markowitz

Harry Markowitz

University of California at San Diego

Robert Snigaroff

University of Alaska Fairbanks, Students

David Wroblewski

Denali Advisors

Date Written: January 1, 2011

Abstract

This paper analyzes the supply and demand for alpha by institutional investors and the money managers who serve them. A large database of products offered by such managers is used to estimate how the demand for such products increases as a function of achieved excess returns and how the ability to produce such excess returns declines with increased AUM (Assets Under Management). Static and dynamic (simulation) analyses are used to explore some implications of these estimates.

Keywords: Supply and Demand, Alpha, Assets under Management, Financial Equilibrium, Institutional Investors, Robust Estimation, Inflow, Excess return

JEL Classification: G00

Suggested Citation

Markowitz, Harry and Snigaroff, Robert and Wroblewski, David, The Supply and Demand of Alpha (January 1, 2011). Journal of Investment Management (JOIM), First Quarter 2011. Available at SSRN: https://ssrn.com/abstract=1804612

Harry Markowitz (Contact Author)

University of California at San Diego ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
(858) 534-3383 (Phone)

Robert Snigaroff

University of Alaska Fairbanks, Students ( email )

AL
United States

David Wroblewski

Denali Advisors ( email )

4275 Executive Square
Suite 650
La Jolla, CA 92037
United States

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