Is There Hedge Fund Contagion?
AbstractWe examine whether hedge funds experience contagion. First, we consider whether extreme movements in equity, fixed income, and currency markets are contagious to hedge funds. Second, we investigate whether extreme adverse returns in one hedge fund style are contagious to other hedge fund styles. To conduct this examination, we estimate binomial and multinomial logit models of contagion using daily returns on hedge fund style indices as well as monthly returns on indices with a longer history. Our main finding is that there is no evidence of contagion from equity, fixed income, and foreign exchange markets to hedge funds, except for weak evidence of contagion for one single daily hedge fund style index. By contrast, we find strong evidence of contagion across hedge fund styles, so that hedge fund styles tend to have poor coincident returns.
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Bibliographic InfoPaper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2006-1.
Date of creation: Feb 2006
Date of revision:
Other versions of this item:
- Nicole M. Boyson & Christof W. Stahel & Rene M. Stulz, 2006. "Is There Hedge Fund Contagion?," NBER Working Papers 12090, National Bureau of Economic Research, Inc.
- Boyson, Nicole & Stahel, Christof & Stulz, Rene, 2008. "Is There Hedge Fund Contagion," Working Papers 08-2, University of Pennsylvania, Wharton School, Weiss Center.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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