RT Journal Article SR Electronic T1 The Role of Speculators During Times of Financial Distress JF The Journal of Alternative Investments FD Institutional Investor Journals SP 10 OP 25 DO 10.3905/jai.2011.14.1.010 VO 14 IS 1 A1 Naomi E. Boyd A1 Jeffrey H. Harris A1 Arkadiusz Nowak YR 2011 UL https://pm-research.com/content/14/1/10.abstract AB One of the best-known and largest hedge fund failures was the 2006 failure of Amaranth Advisors, LLC. The authors use detailed, trader-level data to examine the role of speculators during times of financial distress—in this case, the failure of Amaranth. They find that speculators served as a stabilizing force during the period by maintaining or increasing long positions, even while prices fell. The authors develop two testable propositions regarding liquidation versus transfer of positions and conclude that the probability of transfer was more likely for distant contract expirations and for contracts more dominantly held by the distressed trader. The article also examines the role of speculators in providing liquidity and mitigating the effects of liquidity risk by evaluating the change in the number of traders, the size and time between trades, and a Herfindahl measure of speculative trader concentration during the crisis period.TOPICS: Real assets/alternative investments/private equity, financial crises and financial market history, tail risks, statistical methods