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Measuring risk in the hedge fund sector

Tobias Adrian ()

Current Issues in Economics and Finance, 2007, issue mar

Abstract: Recent high correlations among hedge fund returns could suggest concentrations of risk comparable to those preceding the hedge fund crisis of 1998. A comparison of the current rise in correlations with the elevation before the 1998 event, however, reveals a key difference. The current increase stems mainly from a decline in the volatility of returns, while the earlier rise was driven by high covariances - an alternative measure of comovement in dollar terms. Because volatility and covariances are lower today, the current hedge fund environment differs from the 1998 environment.>

Keywords: Corporations - Finance; Financial institutions; Hedge funds; Rate of return (search for similar items in EconPapers)
Date: 2007
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