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Hedge Funds; What Do We Really Know?

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  • Barry J. Eichengreen
  • Donald J Mathieson

Abstract

Each episode of volatility in financial markets heightens the attention of government officials and others to the role played by the hedge fund industry in financial market dynamics. Hedge funds were implicated in the 1992 crises that led to major exchange rate realignments in the European Monetary System, and again in 1994 after a period of turbulence in international bond markets. Concerns mounted in 1997 in the wake of the financial upheavals in Asia. And they were amplified in 1998, with allegations of large hedge fund transactions in various Asian currency markets and with the near collapse of a major hedge fund, Long-Term Capital Management (LTCM). This paper discusses the size, number, and investment styles of hedge funds, and their interactions with global financial markets. It reviews the present state of their supervision and regulation, and assesses various suggestions for regulating them more closely, often as part of new regulatory approaches to the larger financial markets of which hedge funds are but a small part.

Suggested Citation

  • Barry J. Eichengreen & Donald J Mathieson, 1999. "Hedge Funds; What Do We Really Know?," IMF Economic Issues 19, International Monetary Fund.
  • Handle: RePEc:imf:imfeci:19
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    Cited by:

    1. Danielsson, Jon & Taylor, Ashley & Zigrand, Jean-Pierre, 2005. "Highwaymen or heroes: Should hedge funds be regulated?: A survey," Journal of Financial Stability, Elsevier, vol. 1(4), pages 522-543, October.
    2. Bahn, Christopher, 2006. "Fluch oder Segen? Hedge-Fonds in Deutschland. Ein Beirag zur Versachlichung der Debatte," Discussion Papers, Research Unit: Internationalization and Organization SP III 2006-202, Social Science Research Center Berlin (WZB).
    3. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 2002. "The Role of Large Players in Currency Crises," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 197-268 National Bureau of Economic Research, Inc.
    4. El Kalak, Izidin & Azevedo, Alcino & Hudson, Robert, 2016. "Reviewing the hedge funds literature II: Hedge funds' returns and risk management characteristics," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 55-66.

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