IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Is There Hedge Fund Contagion

  • Boyson, Nicole

    (Northeastern U)

  • Stahel, Christof

    (George Mason U)

  • Stulz, Rene

    (Ohio State U)

Calling contagion the dependence in the probability of occurrence of extreme returns across different hedge fund styles and asset classes that cannot be explained by correlation, we find no systematic evidence of contagion between monthly returns on eight hedge fund styles and equity, bond, and currency markets. In contrast, the average probability that a style index has a return in the lower 10% tail increases from 1.67% to 39.92% as the number of other styles indices with a return in the lower 10% tail increases from 0 to 7. To explain this strong evidence of contagion across hedge fund styles, we investigate how the intensity of contagion depends on various proxies for funding liquidity and asset liquidity. We find that hedge fund contagion is magnified when prime brokerage firms have poor performance (which we would expect to affect hedge fund funding liquidity adversely) and when asset market liquidity is low. Commodity Trading Advisors (CTAs) are not subject to hedge fund contagion.

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://finance.wharton.upenn.edu/weiss/wpapers/08-2.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify ()


Download Restriction: no

Paper provided by University of Pennsylvania, Wharton School, Weiss Center in its series Working Papers with number 08-2.

as
in new window

Length:
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:ecl:upafin:08-2
Contact details of provider: Postal: 3404 Steinberg Hall-Dietrich Hall, 3620 Locust Walk, Philadelphia, PA 19104-6367
Phone: (215)898-7626
Fax: (215)573-2242
Web page: http://finance.wharton.upenn.edu/weiss/papers.htmlEmail:


More information through EDIRC

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. Tobias Adrian & Michael J. Fleming, 2005. "What financing data reveal about dealer leverage," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Mar).
  2. Fung, William & Hsieh, David A., 1999. "A primer on hedge funds," Journal of Empirical Finance, Elsevier, vol. 6(3), pages 309-331, September.
  3. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-18, March.
  4. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  5. Mardi Dungey & Renee Fry & Vance Martin & Brenda González-Hermosillo, 2004. "Empirical Modeling of Contagion; A Review of Methodologies," IMF Working Papers 04/78, International Monetary Fund.
  6. Stephen J. Brown & William N. Goetzmann & Roger G. Ibbotson, 1997. "Offshore Hedge Funds: Survival and Performance 1989-1995," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-18, New York University, Leonard N. Stern School of Business-.
  7. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
  8. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
  9. Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
  10. 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.
  11. Carl Ackermann & Richard McEnally & David Ravenscraft, 1999. "The Performance of Hedge Funds: Risk, Return, and Incentives," Journal of Finance, American Finance Association, vol. 54(3), pages 833-874, 06.
  12. Vikas Agarwal, 2004. "Risks and Portfolio Decisions Involving Hedge Funds," Review of Financial Studies, Society for Financial Studies, vol. 17(1), pages 63-98.
  13. Daniel Capocci, 2002. "An Analysis of Hedge Fund Performance," Finance 0210001, EconWPA.
  14. Geert Bekaert & Campbell R. Harvey, 2003. "Market Integration and Contagion," NBER Working Papers 9510, National Bureau of Economic Research, Inc.
  15. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-84, December.
  16. repec:cup:cbooks:9780521338257 is not listed on IDEAS
  17. Kharoubi, Cécile & Geman, Hélyette, 2003. "Hedge Funds Revisited : Distributional Characteristics, Dependence Structure and Diversification," Economics Papers from University Paris Dauphine 123456789/1385, Paris Dauphine University.
  18. Tarun Chordia & Asani Sarkar & Avanidhar Subrahmanyam, 2003. "An empirical analysis of stock and bond market liquidity," Staff Reports 164, Federal Reserve Bank of New York.
  19. Rodrigo Cifuentes & Hyun Song Shin & Gianluigi Ferrucci, 2005. "Liquidity Risk and Contagion," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 556-566, 04/05.
  20. Kee-Hong Bae & G. Andrew Karolyi & René M. Stulz, 2003. "A New Approach to Measuring Financial Contagion," Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 717-763, July.
  21. Taimur Baig & Ilan Goldfajn, 1998. "Monetary Policy in the Aftermath of Currency Crisis; The Case of Asia," IMF Working Papers 98/170, International Monetary Fund.
  22. de Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic Risk: A Survey," CEPR Discussion Papers 2634, C.E.P.R. Discussion Papers.
  23. François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04.
  24. Karolyi, G Andrew, 2003. "Does International Financial Contagion Really Exist?," International Finance, Wiley Blackwell, vol. 6(2), pages 179-99, Summer.
  25. Acharya, Viral V. & Pedersen, Lasse Heje, 2005. "Asset pricing with liquidity risk," Journal of Financial Economics, Elsevier, vol. 77(2), pages 375-410, August.
  26. Brealey, Richard A & Kaplanis, Evi, 2001. "Hedge Funds and Financial Stability: An Analysis of Their Factor Exposures," International Finance, Wiley Blackwell, vol. 4(2), pages 161-87, Summer.
  27. Fung, William & Hsieh, David A, 2001. "The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 313-41.
  28. Gaurav Amin & Harry. M Kat, 2002. "Stocks, Bond and Hedge Funds: Not a Free Lunch," ICMA Centre Discussion Papers in Finance icma-dp2002-11, Henley Business School, Reading University.
  29. Capocci, Daniel & Hubner, Georges, 2004. "Analysis of hedge fund performance," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 55-89, January.
  30. Benjamin E. Hermalin & Michael S. Weisbach, 1988. "The Determinants of Board Composition," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 589-606, Winter.
  31. Fung, William & Hsieh, David A, 1997. "Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 275-302.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:ecl:upafin:08-2. 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: ()

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.