Share Restrictions, Liquidity Premium and Offshore Hedge Funds
This paper examines share restrictions and liquidity premium by comparing offshore hedge funds and onshore hedge funds. Due to tax provisions and regulatory concerns, offshore and onshore hedge funds have different legal structures, which lead to differences in share restrictions such as the lockup provision. On average, offshore funds impose less share restrictions than onshore funds, hence underperform their onshore counterparts due to illiquidity premium during the period from 1994 to 2005, consistent with Aragon (2007). However, we find that once offshore funds impose share restrictions the illiquidity premium is higher because of a tighter relation between share illiquidity and asset illiquidity in the offshore fund portfolio. Introducing the lockup provision increases the abnormal return by 4.4％ for offshore funds compared with only 2.7％ for onshore funds on an annual basis. We also find that share illiquidity premium becomes lower when an offshore fund is affected by its onshore equivalence through a master-feeder structure.
offshore hedge funds share restrictions liquidity premium master-feeder structure
Bing Liang Hyuna Park
Isenberg School of Management, University of Massachusetts, 121 Presidents Drive, Amherst, MA 01003-9310
国际会议
成都
英文
1-37
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）