Featured Research

from universities, journals, and other organizations

Hedge funds generally make financial markets work more smoothly, expert argues

Date:
April 9, 2014
Source:
Université du Luxembourg
Summary:
Financial markets generally work better thanks to so called “hedge” funds. “Although hedge funds are not well understood by the general public, they provide many important services to the wider economy,” said an expert.

Financial markets generally work better thanks to so called "hedge" funds. "Although hedge funds are not well understood by the general public, they provide many important services to the wider economy," said Kalle Rinne, a researcher at the Luxembourg School of Finance, the department of Finance at the University of Luxembourg.

Related Articles


Standard investment funds purchase a range of traditional financial instruments (typically shares and bonds) and this type of fund is generally favoured by households. However, hedge funds use all kinds of sophisticated financial tools on behalf of their knowledgeable clients, such as pension funds, banks and wealthy individuals.

Dr Rinne, working together with two colleagues, studied the performance from 1994-2011 of the US stock market and a representative sample of hedge funds. They found that, in general, hedge funds made it easier to buy and sell shares by increasing market "liquidity" on the stock market. As well, share price volatility was reduced. Both of these are desirable and encourage investment in stock markets, so helping companies with their growth plans.

However, there were occasions when the hedge fund market became stressed and these funds too then demanded more liquidity than they provided. However, in the period studied, hedge fund crises normally happened at different times to troubles on stock markets. The exception was 2008/9 when these problems coincided, with investors rushing to pull money out of every type of fund. Otherwise, for example, during the crash after the late 1990s "dotcom " boom, hedge funds continued to help the market work more efficiently.


Story Source:

The above story is based on materials provided by Université du Luxembourg. Note: Materials may be edited for content and length.


Journal Reference:

  1. P. Jylha, K. Rinne, M. Suominen. Do Hedge Funds Supply or Demand Liquidity? Review of Finance, 2013; DOI: 10.1093/rof/rft033

Cite This Page:

Université du Luxembourg. "Hedge funds generally make financial markets work more smoothly, expert argues." ScienceDaily. ScienceDaily, 9 April 2014. <www.sciencedaily.com/releases/2014/04/140409094038.htm>.
Université du Luxembourg. (2014, April 9). Hedge funds generally make financial markets work more smoothly, expert argues. ScienceDaily. Retrieved October 25, 2014 from www.sciencedaily.com/releases/2014/04/140409094038.htm
Université du Luxembourg. "Hedge funds generally make financial markets work more smoothly, expert argues." ScienceDaily. www.sciencedaily.com/releases/2014/04/140409094038.htm (accessed October 25, 2014).

Share This



More Science & Society News

Saturday, October 25, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Ebola Protective Suits Being Made in China

Ebola Protective Suits Being Made in China

AFP (Oct. 24, 2014) — A factory in China is busy making Ebola protective suits for healthcare workers and others fighting the spread of the virus. Duration: 00:38 Video provided by AFP
Powered by NewsLook.com
WHO: Millions of Ebola Vaccine Doses by 2015

WHO: Millions of Ebola Vaccine Doses by 2015

AP (Oct. 24, 2014) — The World Health Organization said on Friday that millions of doses of two experimental Ebola vaccines could be ready for use in 2015 and five more experimental vaccines would start being tested in March. (Oct. 24) Video provided by AP
Powered by NewsLook.com
Microsoft Riding High On Strong Surface, Cloud Performance

Microsoft Riding High On Strong Surface, Cloud Performance

Newsy (Oct. 24, 2014) — Microsoft's Q3 earnings showed its tablets and cloud services are really hitting their stride. Video provided by Newsy
Powered by NewsLook.com
EU Gets Climate Deal, UK PM Gets Knock

EU Gets Climate Deal, UK PM Gets Knock

Reuters - Business Video Online (Oct. 24, 2014) — EU leaders achieve a show of unity by striking a compromise deal on carbon emissions. But David Cameron's bid to push back EU budget contributions gets a slap in the face as the European Commission demands an extra 2bn euros. David Pollard reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:

Strange & Offbeat Stories

 

Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins