Header

UZH-Logo

Maintenance Infos

Liquidity risk, return predictability, and hedge funds’ performance: an empirical study


Brandon, Rajna Gibson; Wang, Songtao (2013). Liquidity risk, return predictability, and hedge funds’ performance: an empirical study. Journal of Financial and Quantitative Analysis, 48(1):219-244.

Abstract

This 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

Abstract

This 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

Statistics

Citations

Dimensions.ai Metrics
10 citations in Web of Science®
10 citations in Scopus®
Google Scholar™

Altmetrics

Downloads

46 downloads since deposited on 26 Oct 2018
42 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:National licences > 142-005
Dewey Decimal Classification:330 Economics
Language:English
Date:1 February 2013
Deposited On:26 Oct 2018 15:32
Last Modified:24 Sep 2019 23:40
Publisher:Cambridge University Press
ISSN:0022-1090
OA Status:Green
Publisher DOI:https://doi.org/10.1017/s0022109012000634
Related URLs:https://www.swissbib.ch/Search/Results?lookfor=nationallicencecambridge101017S0022109012000634 (Library Catalogue)

Download

Green Open Access

Download PDF  'Liquidity risk, return predictability, and hedge funds’ performance: an empirical study'.
Preview
Content: Published Version
Language: English
Filetype: PDF (Nationallizenz 142-005)
Size: 216kB
View at publisher