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Does size matter in predicting hedge funds' liquidation?
Author(s) -
Becam Adrien,
Gregoriou Andros,
Gupta Jairaj
Publication year - 2019
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12159
Subject(s) - hedge fund , econometrics , covariate , predictive power , exploit , explanatory power , economics , actuarial science , finance , computer science , philosophy , computer security , epistemology
In this study, we propose a set of covariates that exploit the information content of hedge funds' relative size, performance, growth, tail risk and past liquidation rate in predicting their liquidation. Empirical results show that our proposed covariates exhibit significant predictive power for up to two years even when we control for fund specific characteristics. Furthermore, we estimate separate liquidation prediction models for small, medium and large funds. Our findings suggest that liquidation likelihood of hedge funds is inversely related to fund size, and the statistical significance of factors affecting their liquidation varies across different size categories.