Commonality in hedge fund returns: driving factors and implications

Matthieu Bussiere, Marie Hoerova and B. Klaus
Authors registered in the RePEc Author Service: Berry Klaus and Benjamin Klaus

Working papers from Banque de France

Abstract: We measure the commonality in hedge fund returns, identify its main driving factor and analyze its implications for financial stability. We find that hedge funds commonality increased significantly from 2003 until 2006. We attribute this rise mainly to the increase in hedge funds exposure to emerging market equities, which we identify as a common factor in hedge fund returns over this period. Our results show that funds with a high commonality were affected disproportionately by illiquidity and exhibited negative returns during the subsequent financial crisis, thereby providing little diversification benefits to the financial system and to investors.

Keywords: Hedge funds; commonality; financial stability. (search for similar items in EconPapers)
JEL-codes: G01 G12 G23 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2012
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... g-paper_373_2012.pdf (application/pdf)

Related works:
Journal Article: Commonality in hedge fund returns: Driving factors and implications (2015)
Working Paper: Commonality in hedge fund returns: driving factors and implications (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:373

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().