Hedge Funds and Financial Stability: An Analysis of Their Factor Exposures
In recent years, hedge funds and other highly leveraged institutions have attracted considerable criticism and have been accused of accentuating economic crises by taking large speculative positions in emerging markets. This paper examines how much information about hedge fund exposures can be inferred from fund returns. We provide supporting evidence that factor exposures are not constant and that funds exhibit herding. However, there are important difficulties in using returns data to identify speculative portfolio shifts and we show that considerable caution is needed in drawing inferences about hedge fund activities during crisis periods. Copyright 2001 by Blackwell Publishers Ltd.
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Volume (Year): 4 (2001)
Issue (Month): 2 (Summer)
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