Do risk management practices work? Evidence from hedge funds
Gavin Cassar () and
Joseph Gerakos ()
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Joseph Gerakos: Tuck School of Business at Dartmouth College
Review of Accounting Studies, 2017, vol. 22, issue 3, No 3, 1084-1121
Abstract We examine hedge fund risk management practices and their association with left-tail risk during the 2008 financial crisis. Consistent with risk management practices reducing left-tail risk, funds in our sample that use formal risk models performed significantly better in the extreme down months of 2008. We find no evidence that having either position limits or a dedicated head of risk management is associated with reduced left-tail risk. Funds employing value at risk models had more accurate expectations of how they would perform in a short-term equity bear market.
Keywords: Risk management; Hedge funds; Financial crisis (search for similar items in EconPapers)
JEL-codes: G11 G23 M40 (search for similar items in EconPapers)
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