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Hedge Funds and Financial Stability: An Analysis of their Factor Exposures[Note 1. An earlier version of this paper was written when ...]
Author(s) -
Brealey Richard A.,
Kaplanis Evi
Publication year - 2001
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/1468-2362.00070
Subject(s) - herding , hedge fund , alternative beta , economics , portfolio , hedge accounting , financial crisis , financial economics , fund of funds , open end fund , global assets under management , monetary economics , business , institutional investor , finance , corporate governance , macroeconomics , market liquidity , forestry , geography
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.