Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The Impact of Hedge Funds on Asset Markets

The Impact of Hedge Funds on Asset Markets We construct a simple measure of the aggregate illiquidity of hedge fund portfolios, based on the cross-sectional average first-order autocorrelation coefficient of hedge fund returns, and show that it has strong and robust in- and out-of-sample forecasting power for 72 portfolios of international equities, U.S. corporate bonds, and currencies over the 1994 to 2013 period. The forecasting ability of hedge fund illiquidity for asset returns is in most cases greater than, and provides independent information relative to, well-known predictive variables. We rationalize these findings using a simple equilibrium model, in which hedge funds provide liquidity in asset markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Asset Pricing Studies Oxford University Press

The Impact of Hedge Funds on Asset Markets

Download PDF
42 pages

Loading next page...
 
/lp/oxford-university-press/the-impact-of-hedge-funds-on-asset-markets-0cniMg0ueE

References (0)

References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.

Publisher
Oxford University Press
Copyright
The Author 2015. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oup.com
ISSN
2045-9920
eISSN
2045-9939
DOI
10.1093/rapstu/rav007
Publisher site
See Article on Publisher Site

Abstract

We construct a simple measure of the aggregate illiquidity of hedge fund portfolios, based on the cross-sectional average first-order autocorrelation coefficient of hedge fund returns, and show that it has strong and robust in- and out-of-sample forecasting power for 72 portfolios of international equities, U.S. corporate bonds, and currencies over the 1994 to 2013 period. The forecasting ability of hedge fund illiquidity for asset returns is in most cases greater than, and provides independent information relative to, well-known predictive variables. We rationalize these findings using a simple equilibrium model, in which hedge funds provide liquidity in asset markets.

Journal

The Review of Asset Pricing Studies – Oxford University Press

Published: Dec 17, 2015

There are no references for this article.