Systemic Risk, the TED Spread and Hedge Fund Returns
نویسندگان
چکیده
This study examines the effects of systemic risk on global hedge fund returns. We consider systemic risk as a conditional information variable to predict the underlying exposures to various asset market returns and risk factors. This study examines a proxy for global systemic risk employed by investment professionals known as the Treasury/Eurodollar (TED) spread. The findings reveal that increases in systemic risk causes some hedge fund investment styles to dynamically reduce their equity and stock momentum exposures while others increase their exposures to investment grade bonds and commodities. The information content of systemic risk via the TED spread assists us in better understanding the behaviour of global hedge fund returns. Corresponding author: Email: [email protected]; Tel: +61-7-3735 5311; Fax: +61-7-3735 3719. Systemic Risk, the TED Spread and Hedge Fund Returns
منابع مشابه
Sentiment Risk and Hedge Fund Returns
This paper documents a new and important cross-sectional determinant of hedge fund returns, their exposures to sentiment risk, measured as beta of fund returns to fluctuations in sentiment proxies. For a large sample of equity-oriented hedge funds, those whose sentiment beta ranks in the top decile subsequently outperform the bottom decile by 0.67% per month, after controlling for fund’s exposu...
متن کاملOn the Performance of Hedge Funds
This paper investigates hedge fund performance and risk. The empirical evidence indicates that hedge funds differ substantially from traditional investment vehicles such as mutual funds. The funds with watermarks significantly outperform the funds without watermarks. The average hedge fund returns are related positively to incentive fees, the size of the fund, and the lockup period. Hedge funds...
متن کاملDo Hedge Funds’ Exposures to Risk Factors Predict Their Future Returns?
This paper investigates hedge funds’ exposures to various financial and macroeconomic risk factors through alternative measures of factor betas and examines the performance of these factor betas in predicting the cross-sectional variation in hedge fund returns. The results indicate a positive and significant link between default premium beta (DEF beta) and future hedge fund returns as well as a...
متن کاملA Study on the Performance of Hedge Fund and Market -Timing -Ability
The fund manager always pronounces “the high returns from hedge fund are along with low risk. Is the performance of hedge fund manager really good? In this study, the market-timing ability and performance consistency on hedge fund manager are tested. The Sharpe ratio was employed to implement the consistency of performance for mutual fund in the previous literature. Due to the non-normally dist...
متن کاملEmpirical Finance ( forthcoming ) The Risk in Hedge Fund Strategies : Theory and Evidence from Long / Short Equity Hedge
Theory suggests that long/short equity hedge funds’ returns come from directional as well as spread bets on the stock market. Empirical analysis finds persistent net exposures to the spread between small versus large cap stocks in addition to the overall market. Together, these factors account for more than 80 percent of return variation. Additional factors are price momentum and market activit...
متن کامل