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Recovering Delisting Returns of Hedge Funds

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  • James E. Hodder

    ()
    (School of Business, University of Wisconsin-Madison, USA)

  • Jens Carsten Jackwerth

    ()
    (Department of Economics, University of Konstanz, Germany)

  • Olga Kolokolova

    ()
    (Master Business School,The University of Manchester, United Kingdom)

Abstract

Numerous hedge funds stop reporting each year to commercial data bases, wreaking havoc with analyzing investment strategies which incur the unobserved delisting return. We use estimated portfolio holdings for funds-of-funds to back out estimated hedge-fund delisting returns. For all exiting funds, the estimated mean delisting return is insignificantly different from the average monthly return for live hedge funds. However, funds with poor prior performance and no clearly stated delisting reason had a significantly negative estimated mean delisting return of -5.97%, suggesting that a shock to their returns 'tips them over the edge' and leads to delisting

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Bibliographic Info

Paper provided by Department of Economics, University of Konstanz in its series Working Paper Series of the Department of Economics, University of Konstanz with number 2012-34.

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Length: 51 pages
Date of creation: 24 Sep 2012
Date of revision:
Handle: RePEc:knz:dpteco:1234

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Keywords: hedge funds; delisting returns; exit returns;

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  1. Brown, Stephen J & Goetzmann, William N & Ibbotson, Roger G, 1999. "Offshore Hedge Funds: Survival and Performance, 1989-95," The Journal of Business, University of Chicago Press, vol. 72(1), pages 91-117, January.
  2. Fung, William & Hsieh, David A & Naik, Narayan & Ramadorai, Tarun, 2006. "Hedge Funds: Performance, Risk and Capital Formation," CEPR Discussion Papers 5565, C.E.P.R. Discussion Papers.
  3. Jean Boivin & Serena Ng, 2003. "Are More Data Always Better for Factor Analysis?," NBER Working Papers 9829, National Bureau of Economic Research, Inc.
  4. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
  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. Liang, Bing & Park, Hyuna, 2010. "Predicting Hedge Fund Failure: A Comparison of Risk Measures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(01), pages 199-222, February.
  7. Jenke Ter Horst & Marno Verbeek, 2007. "Fund Liquidation, Self-selection, and Look-ahead Bias in the Hedge Fund Industry," Review of Finance, European Finance Association, vol. 11(4), pages 605-632.
  8. Vikas Agarwal & Naveen D. Daniel & Narayan Y. Naik, 2009. "Role of Managerial Incentives and Discretion in Hedge Fund Performance," Journal of Finance, American Finance Association, vol. 64(5), pages 2221-2256, October.
  9. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
  10. Jushan Bai, 2003. "Inferential Theory for Factor Models of Large Dimensions," Econometrica, Econometric Society, vol. 71(1), pages 135-171, January.
  11. Kolokolova, Olga, 2011. "Strategic behavior within families of hedge funds," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1645-1662, July.
  12. Mila Getmansky & Andrew W. Lo & Igor Makarov, 2003. "An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns," NBER Working Papers 9571, National Bureau of Economic Research, Inc.
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Cited by:
  1. Slavutskaya, Anna, 2013. "Short-term hedge fund performance," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4404-4431.
  2. Sevinc Cukurova & Jose M. Marin, 2011. "On the economics of hedge fund drawdown status: Performance, insurance selling and darwinian selection," Working Papers 2011-04, Instituto MadrileƱo de Estudios Avanzados (IMDEA) Ciencias Sociales.
  3. Agarwal, Vikas & Fos, Vyacheslav & Jiang, Wei, 2010. "Inferring reporting biases in hedge fund databases from hedge fund equity holdings," CFR Working Papers 10-08, University of Cologne, Centre for Financial Research (CFR).

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