Liquidity shocks, size and the relative performance of hedge fund strategies

Index composition changes and the cost of incumbency

“…*** The coefficients are significantly different from zero at 1%. 17 This finding is consistent with the evidence in studies that show a perceived reduction of index effects over time because of the increased number of investors (including hedge funds) who try to take advantage of it (Ding et al, 2009). the added firm and the incumbents are from the same industry and 0 otherwise.…”

The performance of hedge funds and mutual funds in emerging markets

“…Lock-up periods are also a good example to emphasize the higher degree of freedom hedge fund managers enjoy in making investment decisions. For example, hedge funds might invest in illiquid positions and capture liquidity risk premiums, actions not allowed to traditional mutual funds (see Ding et al, 2009, for an analysis of liquidity in the hedge fund context). In case of illiquid investments, investors need to be aware that hedge fund managers might smooth their returns (see Getmansky et al, 2004), which might bias performance measurement results.…”

Probability of information-based trading and the January effect

“…So, abnormal trade pattern could influence an asset price (see Brennan and Subrahmanyam, 1996;Acharya and Pedersen, 2005). In addition, the literature also addresses the effect of liquidity on financial institutions (Ding et al, 2009). …”