Hedge Funds: A Political and Economic Analysis

Cameron J. Gable and Shalendra D. Sharma
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Cameron J. Gable: University of San Francisco, California, USA
Shalendra D. Sharma: University of San Francisco, California, USA

Economia Internazionale / International Economics, 2017, vol. 70, issue 4, 479-508

Abstract: Hedge funds are indispensable to the modern day economy, but remain one of the most poorly understood instruments of financial globalization. The financial crisis of 2007-2009 propagated fallacious interpretations of the role of hedge funds in precipitating the crisis. In turn, this has led to unsubstantiated policymaking. This paper seeks to clarify many of the misconceptions surrounding hedge funds and elucidate their rise to prominence. It will be argued that the excessive regulation of hedge funds is unnecessary and ultimately detrimental to the global financial system. Governments can prudently utilize hedge funds because they have the potential to reduce systemic risk and induce innovation. Gli hedge funds: un’analisi politica ed economica Gli hedge funds sono indispensabili nella economia moderna, ma rimangono uno degli strumenti di finanza globale meno compresi. La crisi finanziaria del 2007-2009 ha indotto interpretazioni fallaci sul ruolo degli hedge funds nel far precipitare la crisi. Di conseguenza ciò ha portato a decisioni politiche infondate. Questo studio cerca di chiarire molte incomprensioni che riguardano gli hedge funds e di spiegare perché sono diventate così diffuse. Si argomenta che l’eccessiva normazione degli hedge funds non è necessaria, anzi è addirittura dannosa per il sistema finanziario globale. I governi possono utilizzare gli hedge funds prudentemente perché sono potenzialmente in grado di ridurre il rischio sistemico.

Keywords: Alternative Investment Vehicles; Asset under Management (AUM); Capital Markets; Long-Term Capital Management; 2007-2009 Financial Crisis (search for similar items in EconPapers)
JEL-codes: F30 F38 G15 G21 (search for similar items in EconPapers)
Date: 2017
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