Liquidity Restrictions on Investment Funds: Are they a Response to Behavioral Bias?

• Autor(a) principal: Malaquias, Rodrigo Fernandes
• Data de Publicação: 2018
• Outros Autores: Pontes, Gleison de Abreu
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: BBR. Brazilian Business Review (English edition. Online)
• Texto Completo: http://www.bbronline.com.br/index.php/bbr/article/view/218
• topic: Multimarket Funds; Market Efficiency; Market Anomalies; Fundos Multimercados; Eficiência de Mercado; Anomalias de Mercado

Liquidity constraints imposed to shareholders of investment funds, also known as lock-up periods, represent an alternative that managers can use to implement and maintain long-term strategies. The academic literature suggests that, as a result of liquidity constraints, funds should deliver a premium to their shareholders, and previous studies have documented this effect. Based on this context, in this paper we analyze the effect of lock-up periods on the profitability of Brazilian multimarket funds. We used a sample composed by 4,662 multimarket funds in the period from January 2009 to February 2016. The results showed a positive effect of lock-up periods on the average profitability of the funds, as well as on their risk-adjusted return. Our discussion highlights arguments that some measures taken by fund managers to protect their strategies against impulsive behaviors of funds’ investors can present a positive effect on the performance of their funds.