Can Regulation Rescue Financial Markets from the Invasion of Hedge Funds?

Bahadir ildokuz

Abstract


Following the crisis of Long Term Capital Management (LTCM), concerns about the hedge funds have increased tremendously. Since the LTCM crisis; hedge fund industry has grown impressively, attracted many investors due to the high rate of returns and has begun to act as financial market leaders which also in return increased the concerns. The problems that hedge funds are able to cause, were seen during this crisis and proved that the benefits of hedge funds can easily be reversed and cause a financial disaster. This ability of hedge funds took the attention of regulatory authorities. This paper discusses the costs and benefits of the hedge funds, shows how hard it can be to impose further regulations on the problematic areas and tries to come up with some possible solutions for these problems that threaten the systemic stability.  


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This work is licensed under a Creative Commons Attribution 4.0 International License.