scholarly journals Liquidity Risk and Hedge Fund Ownership

2011 ◽  
Author(s):  
Charles Cao ◽  
Lubomir Petrasek
Keyword(s):  
Hedge Fund ◽  
Liquidity Risk

Funding Liquidity Risk and the Dynamics of Hedge Fund Lockups

2016 ◽  
Author(s):  
Adam L. Aiken ◽  
Christopher P. Clifford ◽  
Jesse A. Ellis ◽  
Qiping Huang
Keyword(s):  
Hedge Fund ◽  
Liquidity Risk ◽  
Funding Liquidity

Can Liquidity Risk Explain Diseconomies of Scale in Hedge Funds?

2017 ◽  
Vol 07 (02) ◽  
pp. 1750002
Author(s):  
Hany A. Shawky ◽  
Ying Wang
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Liquidity Risk ◽  
Fund Performance ◽  
Diseconomies Of Scale ◽  
Liquidity Crises ◽  
Using Data ◽  
Asset Size ◽  
Hedge Fund Performance

Using data from the Lipper TASS hedge fund database over the period 1994–2012, we examine the role of liquidity risk in explaining the relation between asset size and hedge fund performance. While a significant negative size-performance relation exists for all hedge funds, once we stratify our sample by liquidity risk, we find that such a relationship only exists among funds with the highest liquidity risk. Liquidity risk is found to be another important source of diseconomies of scale in the hedge fund industry. Evidently, for high liquidity risk funds, large funds are less able to recover from the relatively more significant losses incurred during market-wide liquidity crises, resulting in lower performance for large funds relative to small funds.

Funding Liquidity Risk and the Dynamics of Hedge Fund Lockups

2020 ◽  
pp. 1-29
Author(s):  
Adam L. Aiken ◽  
Christopher P. Clifford ◽  
Jesse A. Ellis ◽  
Qiping Huang
Keyword(s):  
Hedge Funds ◽  
Regression Discontinuity ◽  
Hedge Fund ◽  
Liquidity Risk ◽  
Causal Link ◽  
Regression Discontinuity Design ◽  
Control Variables ◽  
Funding Liquidity ◽  
And Control ◽  
Funding Risk

Abstract We exploit the expiring nature of hedge fund lockups to create a new measure of funding liquidity risk that varies within funds. We find that hedge funds with lower funding risk generate higher returns, and this effect is driven by their increased exposure to equity-mispricing anomalies. Our results are robust to a variety of sampling criteria, variable definitions, and control variables. Further, we address endogeneity concerns in various ways, including a placebo approach and regression discontinuity design. Collectively, our results support a causal link between funding risk and the ability of managers to engage in risky arbitrage.

scholarly journals Liquidity Risk, Return Predictability, and Hedge Funds’ Performance: An Empirical Study

2013 ◽  
Vol 48 (1) ◽  
pp. 219-244 ◽  
Author(s):  
Rajna Gibson Brandon ◽  
Songtao Wang
Keyword(s):  
Empirical Study ◽  
Emerging Markets ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Liquidity Risk ◽  
Equity Market ◽  
Return Predictability ◽  
Superior Performance ◽  
Managerial Skills ◽  
Risk Return

AbstractThis article analyzes the effect of liquidity risk on the performance of equity hedge fund portfolios. Similarly to Avramov, Kosowski, Naik, and Teo (2007), (2011), we observe that, before accounting for the effect of liquidity risk, hedge fund portfolios that incorporate predictability in managerial skills generate superior performance. This outperformance disappears or weakens substantially for most emerging markets, event-driven, and long/short hedge fund portfolios once we account for liquidity risk. Moreover, we show that the equity market-neutral and long/short hedge fund portfolios’ “alphas” also entail rents for their service as liquidity providers. These results hold under various robustness tests.

The European hedge funds industry: An empirical analysis of performance, liquidity, and growth

2021 ◽  
Vol 5 (2) ◽  
pp. 89-101
Author(s):  
Soumaya Ben Khelifa
Keyword(s):  
Hedge Funds ◽  
Economic Value ◽  
Hedge Fund ◽  
Liquidity Risk ◽  
Fund Performance ◽  
Market Liquidity ◽  
Share Restrictions ◽  
And Performance ◽  
Hedge Fund Performance ◽  
Analysis Of Performance

While the performance of hedge funds has grabbed much attention from researchers, a few studies have been conducted on the drivers of hedge fund liquidity and performance (Shaub & Schmid, 2013). This study proposes new approaches to investigate the effect of share restrictions on European hedge fund performance and liquidity. We run different regressions of 1) returns, 2) flows, and 3) exposure to market liquidity risk on share restrictions, managerial incentives, and a set of control variables as independent variables. Using a sample of 1423 European hedge funds, our results suggest that restrictions imposed by European hedge funds add economic value to investors. Furthermore, we find that European hedge funds with strong share restrictions take on lower liquidity risk. There is a weak difference in liquidity risk exposure across directional European hedge funds with and without share restrictions. In addition, European hedge funds’ experience, large outflows during a crisis, and all share restrictions do not seem to be significantly related to funding flows in the crisis period, as well as in times of non-crisis. Finally, only the groups of young funds are associated with significant funds exposure to market liquidity risk

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