Working Paper: CEPR ID: DP6877
Authors: Tarun Ramadorai
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.
Keywords: Alpha; Closed-end Funds; Hedge Funds; Liquidity; Secondary Market
JEL Codes: G11; G12; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| liquidity restrictions (G33) | closed-hedge fund premiums (G23) |
| past performance (C52) | closed-hedge fund premiums (G23) |
| volatility of past performance (G17) | closed-hedge fund premiums (G23) |
| fund size (G23) | closed-hedge fund premiums (G23) |
| management fees (G19) | closed-hedge fund premiums (G23) |