Illiquidity

20 Pages Posted: 6 May 2015

See all articles by Hilary Till

Hilary Till

Premia Research LLC; EDHEC-Risk Institute; J.P. Morgan Center for Commodities, University of Colorado Denver Business School; Global Commodities Applied Research Digest

Date Written: January 5, 2004

Abstract

Illiquidity is a common feature of alternative investments, whether one chooses venture capital, private equity, or hedge funds. For hedge funds, the illiquidity can arise from the contracts an investor enters into, which may have one year or longer lock-ups or can arise from the type of investments that a hedge fund specializes in. A hedge fund’s investments may include over-the-counter derivatives instruments, which may be difficult to value, or small-capitalization stocks, which may trade infrequently, for example.

This article will discuss how to explicitly take into consideration the illiquid nature of alternative investments, particularly including hedge funds. This article will specifically discuss the benefits and costs of illiquidity along with proposed quantitative adjustments that enable one to compare illiquid investments on a level playing field with liquid investments.

Keywords: hedge funds, liquidity, illiquidity

JEL Classification: G11, G23

Suggested Citation

Till, Hilary, Illiquidity (January 5, 2004). Available at SSRN: https://ssrn.com/abstract=2602836 or http://dx.doi.org/10.2139/ssrn.2602836

Hilary Till (Contact Author)

Premia Research LLC ( email )

United States
312-583-1137 (Phone)
312-873-3914 (Fax)

HOME PAGE: http://customindices.spindices.com/custom-index-calculations/premia/all

EDHEC-Risk Institute

Nice
France

HOME PAGE: http://risk.edhec.edu/

J.P. Morgan Center for Commodities, University of Colorado Denver Business School ( email )

1475 Lawrence St.
Denver, CO 80202
United States

HOME PAGE: http://www.business.ucdenver.edu/commodities

Global Commodities Applied Research Digest ( email )

J.P. Morgan Center for Commodities
1475 Lawrence Street
Denver, CO 80202
United States

HOME PAGE: http://www.jpmcc-gcard.com/hilary-till

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