When There Is No Place to Hide: Correlation Risk and the Cross-Section of Hedge Fund Returns

Andrea Buraschi, Robert Kosowski and Fabio Trojani ()

The Review of Financial Studies, 2014, vol. 27, issue 2, 581-616

Abstract: Using a novel data set on correlation swaps, we study the relation between correlation risk, hedge fund characteristics, and their risk-return profile. We find that the ability of hedge funds to create market-neutral returns is often associated with a significant exposure to correlation risk, which helps to explain the large abnormal returns found in previous models. We also estimate a significant negative market price of correlation risk, which accounts for the cross-section of hedge fund excess returns. Finally, we detect a pronounced nonlinear relation between correlation risk exposure and the tail risk of hedge fund returns.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hht070 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
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:oup:rfinst:v:27:y:2014:i:2:p:581-616.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().