Hedge fund return sensitivity to global liquidity

Kessler, Stephan; Scherer, Bernd

doi:10.1016/j.finmar.2010.10.004

Cited by 14 publications

(14 citation statements)

References 47 publications

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“…6 A market illiquidity measure could be useful in the context of hedge fund style allocation because it constitutes a forward-looking variable and provides information about how investors perceive the future market environment. Boyson et al (2010), Sadka (2010), and Kessler and Scherer (2011) all document that shocks to market liquidity are an important determinant of hedge fund performance. 7 For example, RV contains highly leveraged investment strategies seeking to exploit small spreads within and across different asset classes, and it is thus extremely vulnerable to market illiquidity (Karavas et al, 2005;Agarwal et al, 2010).…”

Section: Financial Market Illiquiditymentioning

confidence: 99%

Efficient hedge fund style allocations: A rules-based model

Drobetz¹,

Kaiser²,

Zimbehl

2012

J Deriv Hedge Funds

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Section: Financial Market Illiquiditymentioning

confidence: 99%

Efficient hedge fund style allocations: A rules-based model

Drobetz¹,

Kaiser²,

Zimbehl

2012

J Deriv Hedge Funds

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“…We follow the method adopted by Kessler and Scherer (), whose approach was itself based on Longstaff et al . (), to construct the fixed income market liquidity measure.…”

Section: Datamentioning

confidence: 99%

“…We follow the method adopted by Kessler and Scherer (2011), whose approach was itself based on Longstaff et al (2005), to construct the fixed income market liquidity measure. To do so, we use corporate bond, Treasury securities (as the risk-free asset), and CDX credit spread data.…”

Section: Liquidity Measuresmentioning

confidence: 99%

“…Indeed, one of the attractions of hedge funds is precisely the ability to adopt dynamic investment strategies that lead to time-varying market exposure Hsieh, 1997, 2001;Patton and Ramadorai, 2013). Kessler and Scherer (2011) confirm that hedge funds routinely use a wide variety of financial vehicles and investment strategies specifically tailored to different markets. Nevertheless, irrespective of the asset class, since the highest returns tend to be associated with the highest risk exposures, it is inevitable that many hedge funds adopt strategies associated with investing in (under-valued) assets with low liquidity levels.…”

Section: Introductionmentioning

confidence: 99%

“…Such funds would be entirely unhedged with respect to the major source of risk essential to their investment strategy. Hence, liquidity crises would be a little more than a risky bet that investors would have sufficient above-average returns over an extended period to survive the relatively rare but unavoidable occasions when market liquidity conditions reverse and induce a potentially fatal negative outcome (Kessler and Scherer, 2011).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The Market Liquidity Timing Skills of Debt‐oriented Hedge Funds

Luo

Tee

2016

Euro Fin Management

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We investigate the liquidity timing skills of debt-oriented hedge funds following the 2008 credit crisis, which demonstrated the importance of understanding liquidity conditions to manage the market exposure of investments. We base the analysis on the estimated co-movements of fixed income and equity market liquidity. Our findings, which are statistically robust, show evidence of liquidity timing ability in the fixed income market for all debt-oriented hedge fund strategy categories. Joint market liquidity timing skill, however, is only found in some categories. Our findings suggest that debt-oriented hedge fund managers use a sophisticated set of timing strategies in their investment managements.

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OPECmeetings, oil market volatility and herding behaviour in the Saudi Arabia stock market

et al. 2020

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We investigate the influence of oil market volatility and hand‐picked OPEC meetings data on herding tendency in the Saudi equity market. Our results show the presence of significant herding behaviour in the Saudi market; surprisingly this herding behaviour is independent of oil market volatility. Importantly, we find herding on and around the OPEC meeting days however this is only limited to a period of high global uncertainty that is, during the Global Financial Crisis period (GFC) of 2008–2010. However, when we filter out factor‐based herding in the Saudi equities, we also find persistent herding in the post GFC period. These results are consistent when we assess the impact of OPEC meetings using event windows of one to 5 days before and after the announcement. In consideration of the crucial role of OPEC in determining the oil prices, we explain our results of Saudi market herding on and around OPEC meeting days for the prior announcement ambiguity and corrections before, on and after the announcements on global supply. Our results show that this tendency has originated during the GFC, has persisted in the post‐GFC in the Saudi equities and surprisingly, is largely found absent in the periods when the Saudi equity market witnessed bullish market conditions. Our results are robust after accounting for common factor return variations in equity returns, the unconditional and conditional estimates of the volatility in oil prices and several event windows around OPEC meeting days.

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Hedge fund return sensitivity to global liquidity

Cited by 14 publications

References 47 publications

Efficient hedge fund style allocations: A rules-based model

Efficient hedge fund style allocations: A rules-based model

The Market Liquidity Timing Skills of Debt‐oriented Hedge Funds

OPECmeetings, oil market volatility and herding behaviour in the Saudi Arabia stock market

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