Publication Type
Magazine Article
Version
Publisher’s Version
Publication Date
4-2009
Abstract
Market liquidity profoundly impacts hedge funds. Funds trading illiquid securities earns significant risk premium, report smoother returns, can better leverage on information asymmetries, and grapple with stronger capacity constraints. Importantly, the funding liquidity of hedge funds, or their ease of obtaining financing, can have a significant effect on the market liquidity of the securities they trade in, creating a downward liquidity spiral during economic downturns. We review the academic literature and deliver insights that resonate with recent market events.
Keywords
hedge funds, liquidity, market liquidity
Discipline
Finance and Financial Management
Research Areas
Finance
Publication
Hedge Fund Insights: Newsletter of the BNP Paribus Hedge Fund Centre at SMU
First Page
2
Last Page
6
Publisher
BNP Paribus Hedge Fund Centre, Singapore Management University
City or Country
Singapore
Citation
Teo, Melvyn. 2009 April. Liquidity and Hedge Funds. Hedge Fund Insights: Newsletter of the BNP Paribus Hedge Fund Centre at SMU, 2-6.
Copyright Owner and License
BNP Paribus Hedge Fund Centre, Singapore Management University
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.