Tail Risk in Hedge Funds : A Unique View from Portfolio Heldings

Item Type Journal paper
Abstract

We develop a new tail risk measure for hedge funds to examine the impact of tail risk on fund performance and to identify the sources of tail risk. We find that tail risk affects the cross-sectional variation in fund returns, and investments in both, tail-sensitive stocks as well as options, drive tail risk. Moreover, managerial incentives and discretion as well as exposure to funding liquidity shocks are important determinants of tail risk. We find evidence that is consistent with funds being able to time tail risk exposure prior to the recent financial crisis.

Authors Agarwal, Vikas; Ruenzi, Stefan & Weigert, Florian
Journal or Publication Title Journal of Financial Economics
Language English
Keywords Hedge Funds, Tail Risk, Portfolio Holdings, Funding Liquidity Risk
Subjects business studies
finance
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Economic Policy
Refereed Yes
Date September 2017
Publisher Elsevier
Place of Publication Amsterdam [u.a.]
Series Name School of Finance Working Paper Series
Volume 125
Number 3
Page Range 610-636
ISSN 0304-405X
ISSN-Digital 1879-2774
Publisher DOI 10.1016/j.jfineco.2017.06.006
Depositing User Prof. Dr. Florian Weigert
Date Deposited 11 May 2015 12:34
Last Modified 06 Jul 2018 10:02
URI: https://www.alexandria.unisg.ch/publications/240975

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Citation

Agarwal, Vikas; Ruenzi, Stefan & Weigert, Florian (2017) Tail Risk in Hedge Funds : A Unique View from Portfolio Heldings. Journal of Financial Economics, 125 (3). 610-636. ISSN 0304-405X

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https://www.alexandria.unisg.ch/id/eprint/240975
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