Finance professor reveals best time to invest in hedge funds

The best time to allocate money to hedge funds is beginning in the third quarter – and it’s best to maintain those investments through June 30 of the following year – reveals new research from Mustafa Caglayan, associate professor in the FIU Business Department of Finance.

The study found that hedge funds, in contrast to regulated institutional investors, increase their demand for high book-to-market value stocks while decreasing their demand for low book-to-market growth stocks during the second quarter after companies’ annual reports are made public during the first quarter.

“Once hedge funds see the companies’ finances and compute their book-to-market values, they take advantage of the book-to-market anomaly by flipping their strategies away from growth stocks to value stocks, allowing them to separate from the rest of the crowd,” said Caglayan. “While other institutional investors also cut back on buying growth stocks, it’s not at same level and intensity as hedge funds.”

The study was published in the July 2018 Journal of Banking and Finance.

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