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Alternative Marketing for Alternative Investments

46 Pages Posted: 4 May 2013 Last revised: 17 Mar 2015

Yan Lu

University of Central Florida-Department of Finance

Debanjan Mitra

University of Florida

David K. Musto

University of Pennsylvania - Finance Department

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: January 2015

Abstract

Until recently, hedge funds could advertise only indirectly, because direct solicitation was banned. We analyze the causes and effects of indirect advertising by relating the ads for hedge funds’ parent institutions and sibling mutual funds back to the hedge funds’ circumstances, and forward to their flows and performance. We find that abnormally low net inflows predicts the ads, which in turn leads to increased future net inflows, indicating that ads boost sagging flows. We also find that the incidence of large losses increases after ads. Thus, we conclude that indirect advertising is effective but poses some risk to consumers.

Keywords: Hedge fund, advertising ban

Suggested Citation

Lu, Yan and Mitra, Debanjan and Musto, David K. and Ray, Sugata, Alternative Marketing for Alternative Investments (January 2015). Available at SSRN: https://ssrn.com/abstract=2260370 or http://dx.doi.org/10.2139/ssrn.2260370

Yan Lu

University of Central Florida-Department of Finance ( email )

PO Box 161400
Orlando, FL 32816
United States

Debanjan Mitra

University of Florida ( email )

Gainesville, FL 32611
United States

David K. Musto

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Sugata Ray (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

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