Hedge Fund Flows and Contagion in Financial Markets

2007 ◽  
Author(s):  
Bill Ding ◽  
Mila Getmansky ◽  
Bing Liang ◽  
Russ R. Wermers
Keyword(s):  
Financial Markets ◽  
Hedge Fund ◽  
Fund Flows

scholarly journals Speculators, Prices, and Market Volatility

2016 ◽  
Vol 51 (5) ◽  
pp. 1545-1574 ◽  
Author(s):  
Celso Brunetti ◽  
Bahattin Büyükşahin ◽  
Jeffrey H. Harris
Keyword(s):  
Natural Gas ◽  
Financial Markets ◽  
Crude Oil ◽  
Hedge Funds ◽  
Futures Markets ◽  
Hedge Fund ◽  
Market Volatility ◽  
Price Changes ◽  
Oil And Natural Gas ◽  
Price Trends

We use data from 2005–2009 that uniquely identify categories of traders to test how speculators such as hedge funds and swap dealers relate to volatility and price changes. In examining various subperiods where price trends are strong, we find little evidence that speculators destabilize financial markets. To the contrary, hedge fund position changes are negatively related to volatility in corn, crude oil, and natural gas futures markets. Additionally, swap dealer activity is largely unrelated to contemporaneous volatility. Our evidence is consistent with the hypothesis that hedge funds provide valuable liquidity and largely serve to stabilize futures markets.

scholarly journals Hedge Fund Flows and Performance Streaks: How Investors Weigh Information

2021 ◽  
Author(s):  
Guillermo Baquero ◽  
Marno Verbeek
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Cash Flows ◽  
Fund Flows ◽  
Hot Hand ◽  
Highly Sensitive ◽  
Wide Range ◽  
Processing Abilities ◽  
And Performance ◽  
Types Of Information

Cash flows to hedge funds are highly sensitive to performance streaks, a streak being defined as subsequent quarters during which a fund performs above or below a benchmark, even after controlling for a wide range of common performance measures. At the same time, streaks have limited predictive power regarding future fund performance. This suggests investors weigh information suboptimally, and their decisions are driven too strongly by a belief in continuation of good performance, consistent with the “hot hand fallacy.” The hedge funds that investors choose to invest in do not perform significantly better than those they divest from. These findings are consistent with overreaction to certain types of information and do not support the notion that sophisticated investors have superior information or superior information processing abilities. This paper was accepted by David Simchi-Levi, finance.

scholarly journals Alpha or beta in the eye of the beholder: What drives hedge fund flows?

2018 ◽  
Vol 127 (3) ◽  
pp. 417-434 ◽  
Author(s):  
Vikas Agarwal ◽  
T. Clifton Green ◽  
Honglin Ren
Keyword(s):  
Hedge Fund ◽  
Fund Flows

Hedge Fund Flows

2021 ◽  
pp. 63-86
Author(s):  
Guillermo Baquero ◽  
Marno Verbeek
Keyword(s):  
Hedge Fund ◽  
Operational Risk ◽  
Capacity Constraints ◽  
Fund Flows ◽  
Past Performance ◽  
Subsequent Performance ◽  
Fund Managers ◽  
Managerial Skill ◽  
Expected Performance

Hedge fund flows characterize the average opinion of hedge fund investors about managerial skill, expected performance, financial and operational risk. However, liquidity restrictions hamper the ability of investors to rapidly switch from one fund to another. In addition, capacity constraints at the fund or style level may imply that future returns decrease when more money is allocated to a given hedge fund. In this chapter, we provide a detailed overview of what are the drivers, and limitations, of hedge fund flows, how flows are related to measures of past performance, and to what extent flows are able to predict subsequent performance. We also discuss some implications of these relationships, for example in terms of incentives to fund managers.

The Life Cycle of Hedge Funds

2017 ◽  
Author(s):  
Mila Getmansky Sherman ◽  
Rachel (Kyungyeon) Koh
Keyword(s):  
Life Cycle ◽  
Hedge Funds ◽  
Risk Measures ◽  
Hedge Fund ◽  
Nonlinear Function ◽  
Fund Flows ◽  
Related Factors ◽  
Thomson Reuters ◽  
The Right ◽  
Asset Size

This chapter analyzes the life cycle of hedge funds. Analysis using the Thomson Reuters Lipper TASS database reveals industry-related and fund-specific factors affecting the survival probabilities of hedge funds. Analysis of hedge fund flows and asset sizes can offer insights into a fund’s future survival. Fund performance is a nonlinear function of a fund’s asset size. A fund can obtain an optimal asset size by balancing the effects of past returns, fund flows, market impact, and competition. Competition among hedge funds using similar strategies presents challenges. To survive, funds employ dynamic strategies, move nimbly from market to market, and develop unique strengths. Being an effective market and strategy timer is critical because funds using the right strategy at the right time are more likely to survive. The chapter also analyzes the last stage of the hedge fund life cycle—liquidation or closure. Fund characteristics, risk measures, and style-related factors can help predict fund liquidation.

Relative Value Hedge Fund Strategies

2017 ◽  
Author(s):  
George Dikanarov ◽  
Joseph McBride ◽  
Andrew C. Spieler
Keyword(s):  
Financial Markets ◽  
Hedge Fund ◽  
Systematic Risk ◽  
Investment Strategy ◽  
Trading Strategies ◽  
Fund Managers ◽  
Relative Value ◽  
Different Types ◽  
Value Strategy ◽  
Fundamental Values

Relative value strategies, also called arbitrage strategies, are trading strategies that exploit mispricing in the financial markets among the same or related assets. Relative value trading is a popular investment strategy among many hedge fund managers who try to achieve high returns while minimizing risk. To capitalize on the mispricing of assets, investment managers take long positions in the undervalued assets and short positions in the overvalued assets with the expectation that prices will revert to their fundamental values. When using relative value strategies, managers construct market-neutral portfolios to eliminate systematic risk. Fund managers employ leverage to maximize the low returns that individual trades yield. Relative value funds are an attractive investment for individuals seeking to diversify their portfolios with assets that are uncorrelated with the broader market. This chapter discusses the different subcategories within the relative value strategy and the different types of securities each subcategory trades.

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