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The Secondary Market for Hedge Funds and the Closed-Hedge Fund Premium

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  • Ramadorai, Tarun

Abstract

Employing data from a new secondary market for hedge funds, this paper documents the existence of a closed-hedge fund premium, analogous to the closed-end mutual fund premium which has been extensively studied in the literature. Over the past decade, the two premia comove with one another at high and low frequencies, which is surprising given the numerous differences between the two markets. Rational theories put forward to explain the closed-end mutual fund premium are strongly supported as explanations for the variation in closed-hedge fund premia. These results are robust to correction for potential selection bias.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6877.

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Date of creation: Jun 2008
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Handle: RePEc:cpr:ceprdp:6877

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Keywords: alpha; closed-end funds; hedge funds; liquidity; secondary market;

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References

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Citations

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Cited by:
  1. Andrew J. Patton & Tarun Ramadorai, 2013. "On the High-Frequency Dynamics of Hedge Fund Risk Exposures," Journal of Finance, American Finance Association, vol. 68(2), pages 597-635, 04.
  2. Guo, J., 2012. "Quantitative investment strategies and portfolio management," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5590847, Tilburg University.
  3. Biais, Bruno & Rochet, Jean-Charles & Woolley, Paul, 2009. "The Lifecycle of the Financial Sector and Other Speculative Industries," TSE Working Papers 09-031, Toulouse School of Economics (TSE).
  4. Ramadorai, Tarun, 2010. "Investor Interest and Hedge Fund Returns," CEPR Discussion Papers 8092, C.E.P.R. Discussion Papers.
  5. Shive, Sophie & Yun, Hayong, 2013. "Are mutual funds sitting ducks?," Journal of Financial Economics, Elsevier, vol. 107(1), pages 220-237.
  6. Ramadorai, Tarun, 2013. "Capacity constraints, investor information, and hedge fund returns," Journal of Financial Economics, Elsevier, vol. 107(2), pages 401-416.
  7. Chen, Fan & Sanger, Gary C. & Slovin, Myron B., 2013. "Asset sales in the mutual fund industry: Who gains?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4834-4849.
  8. Patton, Andrew J & Ramadorai, Tarun, 2010. "On the Dynamics of Hedge Fund Risk Exposures," CEPR Discussion Papers 7780, C.E.P.R. Discussion Papers.
  9. Jonathan Fletcher & Andrew Marshall, 2014. "Investor Heterogeneity and the Cross-section of U.K. Investment Trust Performance," Journal of Financial Services Research, Springer, vol. 45(1), pages 67-89, February.

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