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Keywords:Hedge funds 

Hedge funds and systemic risk

a speech at the Federal Reserve Bank of Atlanta?s 2006 Financial Markets Conference, Sea Island, Georgia
Speech , Paper 198

Working Paper
Returns to Active Management: The Case of Hedge Funds

Do more active hedge fund managers generate higher returns than their less active peers? We attempt to answer this question. Using Kalman Filter techniques, we estimate the risk exposure dynamics of a large sample of live and dead equity long-short hedge funds. These estimates are then used to develop a measure of activeness for each hedge fund. Our results show that there exists a nonlinear relationship between activeness and performance. Using raw returns as a measure of performance, it is found that more active funds outperform the less active ones. However, when risk adjusted returns are ...
International Finance Discussion Papers , Paper 1112

Working Paper
Fundamental Arbitrage under the Microscope: Evidence from Detailed Hedge Fund Transaction Data

We exploit detailed transaction and position data for a sample of long-short equity hedge funds to study the trading activity of fundamental investors. We find that hedge funds exhibit skill in opening positions, but that they close their positions too early, thereby forgoing about a third of the trades’ potential profitability. We explain this behavior with the limits of arbitrage: hedge funds close positions early in order to reallocate their capital to more profitable investments and/or to accommodate tightened financial constraints. Consistent with this view, we document that hedge ...
Finance and Economics Discussion Series , Paper 2021-022

Journal Article
Corporate governance and hedge fund management

Conventional thinking about governance issues for hedge funds is to view them as mutual funds or money managers. This article proposes an alternative view -- that hedge fund governance is best understood by looking at limited partnerships or public firms that are similar in terms of either their assets or liabilities. This reasoning suggests that most hedge funds can be classified into only two groups for the purpose of understanding governance issues: funds that engage in proprietary trading and those that are more like private equity partnerships. ; The analysis implicitly explains why ...
Economic Review , Volume 91 , Issue Q 4 , Pages 81-91

Journal Article
Preface: hedge funds: creators of risk?

Economic Review , Volume 91 , Issue Q 4 , Pages v-vi

Journal Article
Hedge funds: an industry in its adolescence

The dramatic increase in the number of hedge funds and the "institutionalization" of the industry over the past decade have spurred rigorous research into hedge fund performance. This research has tended to uncover more questions than answers about the dynamic and multifaceted hedge fund industry. ; This article presents a simple hedge fund business model in which fund returns are a function of three key elements -- how the funds trade, where they trade, and how the positions are financed. The article also provides methods to help investors, intermediaries, and regulators identify systemic ...
Economic Review , Volume 91 , Issue Q 4 , Pages 1-34

Journal Article
Hedge funds and investor protection regulation

A recent Securities and Exchange Commission (SEC) ruling requiring hedge fund advisers to register with the SEC aims to foster conduct and compliance to better protect hedge fund investors. This article focuses on investor protection regulation, considering its goals and likely costs and benefits. After reviewing some alternative regulatory approaches, the author examines the current U.S. regulatory structure for hedge funds, which has, perhaps unwittingly, separated hedge fund investors into two distinct classes -- retail and wholesale -- defined by wealth levels. ; The SEC's recent ruling ...
Economic Review , Volume 91 , Issue Q 4 , Pages 35-48

Journal Article
Measuring risk in the hedge fund sector

Recent high correlations among hedge fund returns could suggest concentrations of risk comparable to those preceding the hedge fund crisis of 1998. A comparison of the current rise in correlations with the elevation before the 1998 event, however, reveals a key difference. The current increase stems mainly from a decline in the volatility of returns, while the earlier rise was driven by high covariances - an alternative measure of comovement in dollar terms. Because volatility and covariances are lower today, the current hedge fund environment differs from the 1998 environment.>
Current Issues in Economics and Finance , Volume 13 , Issue Mar

Journal Article
Gov. Warsh: marketplace best discipline for hedge funds

Federal Reserve Gov. Kevin Warsh recently told Congress that while hedge funds present risk management challenges, the market provides necessary discipline. He added that the Fed and other agencies are monitoring institutions' exposure to risk.
Financial Update , Volume 20 , Issue 3


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