Tail Risk in Hedge Funds: A Unique View from Portfolio Holdings

Vikas Agarwal (), Stefan Ruenzi and Florian Weigert ()

No 1508, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: We develop a new tail risk measure for hedge funds to examine the impact of tail risk on fund performance and to identify the sources of tail risk. We find that tail risk affects the cross-sectional variation in fund returns, and investments in both, tail-sensitive stocks as well as options, drive tail risk. Moreover, managerial incentives and discretion as well as exposure to funding liquidity shocks are important determinants of tail risk. We find evidence that is consistent with funds being able to time tail risk exposure prior to the recent financial crisis.

Keywords: Hedge Funds; Tail Risk; Portfolio Holdings; Funding Liquidity Risk (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2015-05
New Economics Papers: this item is included in nep-ban and nep-rmg
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Citations: View citations in EconPapers (9)

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http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1508.pdf (application/pdf)

Related works:
Journal Article: Tail risk in hedge funds: A unique view from portfolio holdings (2017)
Working Paper: Tail risk in hedge funds: A unique view from portfolio holdings (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2015:08

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