Political risk, hedge fund strategies, and returns: Evidence from G7 countries

Pattamon Rungmaitree, Agyenim Boateng, Frederick Ahiabor and Qinye Lu

Journal of International Financial Markets, Institutions and Money, 2022, vol. 81, issue C

Abstract: In this study, we examine the effects of political risk across a group of seven industrialised countries (G7) on hedge fund returns and further explore whether the effects of political risk on hedge fund returns vary according to hedge fund strategies employed by fund managers. Employing factor analysis to quantify political risk across the G7 countries, our results evince two interesting aspects. First, we find political risk to exert a negative and significant impact on hedge fund returns, suggesting that hedge fund performance tends to decrease as political risks across G7 nations increase. Second, the effects of political risk on hedge fund returns appear to vary with different hedge fund strategies employed by fund managers. Our results appear robust after employing three different analytical approaches and controlling a set of factors previously identified to affect hedge fund returns.

Keywords: Political risk; Hedge fund returns; Fund Strategies; G7 countries (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:81:y:2022:i:c:s1042443122001500

DOI: 10.1016/j.intfin.2022.101678

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