Factors that Affect the Performance of Distressed Securities Hedge Funds
Journal
Journal of Derivatives & Hedge Funds
ISSN
1753-9641
ISSN-Digital
1753-965X
Type
journal article
Date Issued
2013-08-01
Author(s)
Abstract
We present a four factor model to replicate distressed securities hedge fund returns. The model considers the returns of short put options, a short straddle on bonds, the spread between high yield and Treasury bonds, and stocks with small market capitalization. On the basis of this model, we conduct a multivariate analysis of how fund characteristics affect risk-adjusted performance. A high-water mark and performance-based compensation are positively related to risk-adjusted performance, which is in line with much of the hedge fund literature. In contrast to other work, however, we find that lock-up is negatively related to performance and that fund age is unrelated to performance. Our work provides a better understanding of the nature and critical factors for the success of distressed securities hedge funds.
Language
English
Keywords
HEDGE funds
CAPITAL investments
MARKET capitalization
COMPOSITE indexes (Finance)
DISTRESSED securities
MULTIVARIATE analysis
GOVERNMENT securities
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Palgrave Macmillian
Publisher place
Basingstoke
Volume
19
Number
3
Start page
159
End page
180
Pages
22
Subject(s)
Division(s)
Eprints ID
238388