Ramadorai, Tarun, Kruttli, Mathias and Patton, Andrew (2013) The Impact of Hedge Funds on Asset Markets. University of Oxford.
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While there has been enormous interest in hedge funds from academics, prospective and current investors, and policymakers, rigorous empirical evidence of their impact on asset markets has been difficult to find. We construct a simple measure of the aggregate illiquidity of hedge fund portfolios, and show that it has strong in- and out-of-sample forecasting power for 72 portfolios of international equities, corporate bonds, and currencies over the 1994 to 2011 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 for each of these asset classes. We construct a simple equilibrium model to rationalize our findings, and empirically verify auxiliary predictions of the model.
|Item Type:||Other Working Paper|
|Keywords:||hedge funds; asset markets|
|Centre:||Faculty of Finance|
|Date Deposited:||23 Sep 2013 09:44|
|Last Modified:||23 Oct 2015 14:08|
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