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.

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 23, 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 23, 2014).

Share This



More Science & Society News

Thursday, October 23, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Chameleon Camouflage to Give Tanks Cloaking Capabilities

Chameleon Camouflage to Give Tanks Cloaking Capabilities

Reuters - Innovations Video Online (Oct. 22, 2014) — Inspired by the way a chameleon changes its colour to disguise itself; scientists in Poland want to replace traditional camouflage paint with thousands of electrochromic plates that will continuously change colour to blend with its surroundings. The first PL-01 concept tank prototype will be tested within a few years, with scientists predicting that a similar technology could even be woven into the fabric of a soldiers' clothing making them virtually invisible to the naked eye. Matthew Stock reports. Video provided by Reuters
Powered by NewsLook.com
Jet Sales Lift Boeing Profit 18 Pct.

Jet Sales Lift Boeing Profit 18 Pct.

Reuters - Business Video Online (Oct. 22, 2014) — Strong jet demand has pushed Boeing to raise its profit forecast for the third time, but analysts were disappointed by its small cash flow. Fred Katayama reports. Video provided by Reuters
Powered by NewsLook.com
U.S. Issues Ebola Travel Restrictions, Are Visa Bans Next?

U.S. Issues Ebola Travel Restrictions, Are Visa Bans Next?

Newsy (Oct. 22, 2014) — Now that the U.S. is restricting travel from West Africa, some are dropping questions about a travel ban and instead asking about visa bans. Video provided by Newsy
Powered by NewsLook.com
US to Track Everyone Coming from Ebola Nations

US to Track Everyone Coming from Ebola Nations

AP (Oct. 22, 2014) — Stepping up their vigilance against Ebola, federal authorities said Wednesday that everyone traveling into the US from Ebola-stricken nations will be monitored for symptoms for 21 days. (Oct. 22) Video provided by AP
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