Tail Risk in Hedge Funds : A Unique View from Portfolio Heldings
Journal
Journal of Financial Economics
Series
School of Finance Working Paper Series
ISSN
0304-405X
ISSN-Digital
1879-2774
Type
journal article
Date Issued
2017-09
Author(s)
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.
Language
English
Keywords
Hedge Funds
Tail Risk
Portfolio Holdings
Funding Liquidity Risk
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam [u.a.]
Volume
125
Number
3
Start page
610
End page
636
Subject(s)
Eprints ID
240975
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