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 March 30, 2015 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 March 30, 2015).

Share This


More From ScienceDaily



More Science & Society News

Monday, March 30, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Soda, Salt and Sugar: The Next Generation of Taxes

Soda, Salt and Sugar: The Next Generation of Taxes

Washington Post (Mar. 30, 2015) — Denisa Livingston, a health advocate for the Diné Community Advocacy Alliance, and the Post&apos;s Abby Phillip discuss efforts around the country to make unhealthy food choices hurt your wallet as much as your waistline. Video provided by Washington Post
Powered by NewsLook.com
UnitedHealth Buys Catamaran

UnitedHealth Buys Catamaran

Reuters - Business Video Online (Mar. 30, 2015) — The $12.8 billion merger will combine the U.S.&apos; third and fourth largest pharmacy benefit managers. Analysts say smaller PBMs could also merge. Fred Katayama reports. Video provided by Reuters
Powered by NewsLook.com
Lights out for Earth Hour

Lights out for Earth Hour

Reuters - News Video Online (Mar. 29, 2015) — Landmarks in cities around the globe turn off their lights to mark Earth Hour. Paul Chapman reports. Video provided by Reuters
Powered by NewsLook.com
Prince Charles Touts Importance of 'Earth Hour'

Prince Charles Touts Importance of 'Earth Hour'

AP (Mar. 28, 2015) — People across Asia gathered to watch as the lights in their cities went out as part of Earth Hour 2015, an environmental awareness campaign that Prince Charles called a reminder "that together we have the power to change things." (March 28) 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