Can hedge funds time market liquidity
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TLDR
In this article, the authors explore a new dimension of fund managers' timing ability by examining whether they can time market liquidity through adjusting their portfolios' market exposure as aggregate liquidity conditions change.About:
This article is published in Journal of Financial Economics.The article was published on 2013-08-01 and is currently open access. It has received 190 citations till now. The article focuses on the topics: Liquidity crisis & Liquidity risk.read more
Citations
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Hedge Fund Stock Trading in the Financial Crisis of 2007–2009
TL;DR: This article showed that hedge fund investors withdraw capital three times as intensely as do mutual fund investors in response to poor returns and identified important roles for share liquidity restrictions and institutional ownership in hedge funds.
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Noise as Information for Illiquidity
Grace Xing Hu,Jun Pan,Jiang Wang +2 more
TL;DR: This paper proposed a market-wide liquidity measure by exploiting the connection between the amount of arbitrage capital in the market and observed "noise" in U.S. Treasury bonds, which allows yields to deviate more freely from the curve, resulting in more noise in prices.
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Hedge Fund Stock Trading in the Financial Crisis of 2007-2009
TL;DR: This article showed that hedge fund investors withdraw capital three times as intensely as mutual fund investors do in response to poor returns, and attributed this stronger sensitivity to losses to share liquidity restrictions and institutional ownership in hedge funds.
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Macroeconomic risk and hedge fund returns
TL;DR: In this article, the authors estimate hedge fund and mutual fund exposure to newly proposed measures of macroeconomic risk that are interpreted as measures of economic uncertainty and find that the resulting uncertainty betas explain a significant proportion of the cross-sectional dispersion in hedge fund returns.
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Flights to safety
TL;DR: In this paper, the authors identify flight-to-safety (FTS) days for twenty-three countries using only stock and bond returns and a model averaging approach and find that FTS days comprise less than 2% of the sample and are associated with a 2.7% average bond-equity return differential and significant flows out of equity funds and into government bond and money market funds.
References
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Bootstrap Methods: Another Look at the Jackknife
TL;DR: In this article, the authors discuss the problem of estimating the sampling distribution of a pre-specified random variable R(X, F) on the basis of the observed data x.
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Illiquidity and stock returns: cross-section and time-series effects $
TL;DR: In this article, the authors show that expected market illiquidity positively affects ex ante stock excess return, suggesting that expected stock ex ante excess return partly represents an illiquid price premium, which complements the cross-sectional positive return-illiquidity relationship.
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Illiquidity and Stock Returns: Cross-Section and Time-Series Effects
TL;DR: In this paper, the effects of stock illiquidity on stock return have been investigated and it was shown that expected market illiquidities positively affects ex ante stock excess return (usually called risk premium) over time.
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Liquidity Risk and Expected Stock Returns
Lubos Pastor,Robert F. Stambaugh +1 more
TL;DR: In this article, the authors investigated whether marketwide liquidity is a state variable important for asset pricing and found that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity.
Posted Content
Market liquidity and funding liquidity
TL;DR: In this article, the authors provide a model that links an asset's market liquidity and traders' funding liquidity, i.e., the ease with which they can obtain funding, to explain the empirically documented features that market liquidity can suddenly dry up, has commonality across securities, is related to volatility, is subject to flight to quality, and comoves with the market.