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Conference Paper: The Allocative Role of Prime Brokers
| Title | The Allocative Role of Prime Brokers |
|---|---|
| Authors | |
| Issue Date | 2017 |
| Citation | 5th Hong Kong Joint Finance Research Workshop, Hong Kong, 8 Septemebr 2017 How to Cite? |
| Abstract | Prime brokers are large investment banks that provide daily transactional services to hedge funds. Their unique position should therefore provide them with private information about their hedge fund clients. In this paper, I build a proxy for prime broker directed fund flows, and find that these flows predict hedge fund performance. In particular, when intermediary balance sheets are strong, flows positively predict performance, and when balance sheets are weak, flows negatively predict performance. This is consistent with the trade-off between long-term reputation and short-term profit in the theory of intermediation (Fang, 2005). Furthermore, these results provide evidence that the financial health of intermediaries affects the allocation of arbitrage capital. |
| Persistent Identifier | http://hdl.handle.net/10722/270431 |
| DC Field | Value | Language |
|---|---|---|
| dc.contributor.author | Sinclair, AJ | - |
| dc.date.accessioned | 2019-05-28T01:27:24Z | - |
| dc.date.available | 2019-05-28T01:27:24Z | - |
| dc.date.issued | 2017 | - |
| dc.identifier.citation | 5th Hong Kong Joint Finance Research Workshop, Hong Kong, 8 Septemebr 2017 | - |
| dc.identifier.uri | http://hdl.handle.net/10722/270431 | - |
| dc.description.abstract | Prime brokers are large investment banks that provide daily transactional services to hedge funds. Their unique position should therefore provide them with private information about their hedge fund clients. In this paper, I build a proxy for prime broker directed fund flows, and find that these flows predict hedge fund performance. In particular, when intermediary balance sheets are strong, flows positively predict performance, and when balance sheets are weak, flows negatively predict performance. This is consistent with the trade-off between long-term reputation and short-term profit in the theory of intermediation (Fang, 2005). Furthermore, these results provide evidence that the financial health of intermediaries affects the allocation of arbitrage capital. | - |
| dc.language | eng | - |
| dc.relation.ispartof | 5th Hong Kong Joint Finance Research Workshop | - |
| dc.title | The Allocative Role of Prime Brokers | - |
| dc.type | Conference_Paper | - |
| dc.identifier.email | Sinclair, AJ: andrew.sinclair@hku.hk | - |
| dc.identifier.authority | Sinclair, AJ=rp02298 | - |
| dc.identifier.hkuros | 289242 | - |