We explore a new dimension of fund managers' timing ability by examining whether they can time market liquidity through adjusting their portfolios'market exposure as aggregate liquidity conditions change. Using a large sample of hedge funds, we find strong evidence of liquidity timing. A bootstrap analysis suggests that top-ranked liquidity timers cannot be attributed to pure luck. In out-of-sa...

We present an empirical study of the pricing effect of liquidity in the credit default swaps (CDS) market. We construct liquidity proxies to capture various facets of CDS liquidity including adverse selection, search frictions, and inventory costs. We show that the liquidity effect on CDS spreads is significant with an estimated liquidity premium on par with those of Treasury bonds and corporat...

We exploit the expiring nature of hedge fund lockups to create a dynamic, fund-level proxy of funding liquidity risk. In contrast to the prior literature, our measure allows us to identify how within-fund changes in funding liquidity risk are associated with performance and risk taking. Lockup funds with lower funding liquidity risk take more tail risk and have better risk-adjusted performance,...

This paper studies the pricing of liquidity risk in the cross section of corporate bonds for the period from January 1994 to March 2009. The average return on bonds with high sensitivities to aggregate liquidity exceeds that for bonds with low sensitivities by about 4% annually. The positive relation between expected corporate bond returns and liquidity beta is robust to the effects of default ...

In this study business operations and liquidity and credit risk on price fluctuations on the stock exchange since 2010 to 2013 has been Tehran distance. The sample consisted of 76 company The systematic elimination method is selected. The company had a total of 304 years, in this study, the hypothesis of linear regression and correlation to analyse the data and test hypotheses Eviews software i...

The current study aims to investigate the relationship between stock liquidity risk and financial information quality criteria (i.e. the timely dividends announcement, accruals quality and the percentage of profitability prediction error) of companies listed on the Tehran Stock Exchange. For this purpose, 148 cases of data from listed companies, collected from 2007 to 2012, were employed in ord...

Article history: Received 24 April 2012 Received in revised form 8 September 2012 Accepted 17 September 2012 Available online 25 September 2012 We extend the market timing literature to show that SEO timing can be characterized by the dynamics of liquidity risk. That is, firms tend to issue SEOs when liquidity risk declines to the point where investors have least concern of the risk. In the abs...

We study the impact of public information on insider trading in the context of Kyle’s speculative market. The linear Nash equilibrium is characterized analytically. We find that public information is detrimental for the insider and beneficial for the liquidity traders. The insider puts a negative weight on the public information in formulating his optimal strategy. The equilibrium price becomes...

We investigate the stochastic dynamics of bank liquidity parameters such as liquid assets and nett cash outflow in relation to the global financial crisis. These parameters enable us to determine the liquidity coverage ratio that is one of themetrics used in ratio analysis to measure bank liquidity. In this regard, numerical results show that bank behavior related to liquidity was highly procyc...

This paper examines how hedge funds manage their market risk according to changes in aggregate liquidity conditions. Using a large sample of equity-oriented hedge funds during the period of 1994–2008, we find strong evidence that hedge-fund managers possess the ability to time market liquidity at both the style category level and the individual fund level. They increase (decrease) their portfol...