Hedge fund leverage: 2002–2017

Bing Liang and Liping Qiu

European Financial Management, 2019, vol. 25, issue 4, 908-941

Abstract: Using a large panel data set, we investigate the dynamics of hedge fund leverage from 2002 to 2017 and find considerable variations in both time series and cross section. More than 70% of hedge funds use leverage and almost half of the leveraged funds are levered through margin borrowing. On average, hedge funds decreased leverage prior to the beginning of the financial crisis, with leverage remaining below the pre‐crisis levels. We find that the level of leverage and its changes are related to fund characteristics such as age, governance, performance, risk, fees, liquidity, survival, and the birth of a new fund.

Date: 2019
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