Advanced Search
MyIDEAS: Login

Market conditions and hedge fund survival

Contents:

Author Info

  • Mark Carlson
  • Jason Steinman

Abstract

As the hedge fund industry has grown, there has been increased concern that, during sharp market moves, hedge fund failures could exacerbate the deterioration in financial conditions and deepen a crisis. However, there has not been much formal analysis regarding the impact of financial market conditions on hedge fund survival. To help fill this gap, this paper examines the relationship between financial market conditions and the likelihood of hedge fund failure after controlling for performance and other characteristics. The analysis is conducted using data on individual funds and industry aggregates. We find that market returns and volatility influence fund failures, although the impact depends on the funds' investment strategies. The results of the analysis are then used to predict hedge fund failures based on actual market returns and on stress scenarios. We find that the hedge fund industry is generally robust to different shocks.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.federalreserve.gov/pubs/feds/2008/200828/200828abs.html
Download Restriction: no

File URL: http://www.federalreserve.gov/pubs/feds/2008/200828/200828pap.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2008-28.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:fip:fedgfe:2008-28

Contact details of provider:
Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551
Web page: http://www.federalreserve.gov/
More information through EDIRC

Order Information:
Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html

Related research

Keywords: Hedge funds;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Nicholas Chan & Mila Getmansky & Shane M. Haas & Andrew W. Lo, 2007. "Systemic Risk and Hedge Funds," NBER Chapters, in: The Risks of Financial Institutions, pages 235-338 National Bureau of Economic Research, Inc.
  2. Baquero, Guillermo & ter Horst, Jenke & Verbeek, Marno, 2005. "Survival, Look-Ahead Bias, and Persistence in Hedge Fund Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(03), pages 493-517, September.
  3. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  4. Tomas Garbaravicius & Frank Dierick, 2005. "Hedge funds and their implications for financial stability," Occasional Paper Series 34, European Central Bank.
  5. Liang, Bing, 2000. "Hedge Funds: The Living and the Dead," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(03), pages 309-326, September.
  6. Fung, William & Hsieh, David A., 2000. "Performance Characteristics of Hedge Funds and Commodity Funds: Natural vs. Spurious Biases," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(03), pages 291-307, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Serge Darolles & Patrick Gagliardini & Christian Gouriéroux, 2012. "Survival of Hedge Funds : Frailty vs Contagion," Working Papers 2012-36, Centre de Recherche en Economie et Statistique.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2008-28. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.