Dodd-Franking the hedge Funds

Douglas Cumming; Na Dai; Sofia Johan

doi:10.1016/j.jbankfin.2017.09.012

Dodd-Franking the hedge Funds

Douglas Cumming, Na Dai^*, Sofia Johan

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

This paper analyzes hedge fund performance, risk, and fund flows before and after the implementation of the Dodd–Frank Act. The data indicates that, relative to non-US hedge funds, US hedge funds that are regulated under Dodd–Frank have lower fund alphas in the post-Dodd–Frank implementation period, both statistically and economically significant, while the evidence on its effect on risk (standard deviations and idiosyncratic risk) is mixed. We find evidence that there is more fund outflow (or less fund inflow) for certain US hedge fund strategies after the implementation of Dodd–Frank. We show some differences in these findings dependent on fund size and strategy. The findings are robust to difference-in-differences analyses comparing US to non-US funds.

Original language	English
Article number	105216
Journal	Journal of Banking and Finance
Volume	119
DOIs	https://doi.org/10.1016/j.jbankfin.2017.09.012
Publication status	Published - Oct 2020

Bibliographical note

Funding Information:
We owe thanks to the seminar participants at the Goethe University of Frankfurt, SUNY Albany, York University, the Securities and Exchange Commission, the 7th IFABS Conference on ``The Future of Financial Institutions and Markets: Navigating the Challenges Ahead'' in Hangzhou, China, and the 2017 American Law and Economics Association Annual Meeting at Yale University. Na Dai owes thanks the Center for Institutional Investment Management at SUNY – Albany for data support. Douglas Cumming and Sofia Johan owe thanks to the Social Sciences and Humanities Research Council of Canada for financial support. This paper was awarded the 2015 Best Paper Award from the Alternative Investment Management Association.

Funding Information:
We owe thanks to the seminar participants at the Goethe University of Frankfurt, SUNY Albany, York University, the Securities and Exchange Commission, the 7th IFABS Conference on ``The Future of Financial Institutions and Markets: Navigating the Challenges Ahead'' in Hangzhou, China, and the 2017 American Law and Economics Association Annual Meeting at Yale University. Na Dai owes thanks the Center for Institutional Investment Management at SUNY ? Albany for data support. Douglas Cumming and Sofia Johan owe thanks to the Social Sciences and Humanities Research Council of Canada for financial support. This paper was awarded the 2015 Best Paper Award from the Alternative Investment Management Association.

Publisher Copyright:
© 2017

Keywords

Dodd–Frank
Hedge funds
Law and finance

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.jbankfin.2017.09.012

Best Paper Award for Dodd-Franking the Hedge Funds
Cumming, Douglas (Recipient), 2015
Prize: Prize (including medals and awards)

Cite this

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title = "Dodd-Franking the hedge Funds",

abstract = "This paper analyzes hedge fund performance, risk, and fund flows before and after the implementation of the Dodd–Frank Act. The data indicates that, relative to non-US hedge funds, US hedge funds that are regulated under Dodd–Frank have lower fund alphas in the post-Dodd–Frank implementation period, both statistically and economically significant, while the evidence on its effect on risk (standard deviations and idiosyncratic risk) is mixed. We find evidence that there is more fund outflow (or less fund inflow) for certain US hedge fund strategies after the implementation of Dodd–Frank. We show some differences in these findings dependent on fund size and strategy. The findings are robust to difference-in-differences analyses comparing US to non-US funds.",

keywords = "Dodd–Frank, Hedge funds, Law and finance",

author = "Douglas Cumming and Na Dai and Sofia Johan",

note = "Funding Information: We owe thanks to the seminar participants at the Goethe University of Frankfurt, SUNY Albany, York University, the Securities and Exchange Commission, the 7th IFABS Conference on ``The Future of Financial Institutions and Markets: Navigating the Challenges Ahead'' in Hangzhou, China, and the 2017 American Law and Economics Association Annual Meeting at Yale University. Na Dai owes thanks the Center for Institutional Investment Management at SUNY – Albany for data support. Douglas Cumming and Sofia Johan owe thanks to the Social Sciences and Humanities Research Council of Canada for financial support. This paper was awarded the 2015 Best Paper Award from the Alternative Investment Management Association. Funding Information: We owe thanks to the seminar participants at the Goethe University of Frankfurt, SUNY Albany, York University, the Securities and Exchange Commission, the 7th IFABS Conference on ``The Future of Financial Institutions and Markets: Navigating the Challenges Ahead'' in Hangzhou, China, and the 2017 American Law and Economics Association Annual Meeting at Yale University. Na Dai owes thanks the Center for Institutional Investment Management at SUNY ? Albany for data support. Douglas Cumming and Sofia Johan owe thanks to the Social Sciences and Humanities Research Council of Canada for financial support. This paper was awarded the 2015 Best Paper Award from the Alternative Investment Management Association. Publisher Copyright: {\textcopyright} 2017",

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N2 - This paper analyzes hedge fund performance, risk, and fund flows before and after the implementation of the Dodd–Frank Act. The data indicates that, relative to non-US hedge funds, US hedge funds that are regulated under Dodd–Frank have lower fund alphas in the post-Dodd–Frank implementation period, both statistically and economically significant, while the evidence on its effect on risk (standard deviations and idiosyncratic risk) is mixed. We find evidence that there is more fund outflow (or less fund inflow) for certain US hedge fund strategies after the implementation of Dodd–Frank. We show some differences in these findings dependent on fund size and strategy. The findings are robust to difference-in-differences analyses comparing US to non-US funds.

AB - This paper analyzes hedge fund performance, risk, and fund flows before and after the implementation of the Dodd–Frank Act. The data indicates that, relative to non-US hedge funds, US hedge funds that are regulated under Dodd–Frank have lower fund alphas in the post-Dodd–Frank implementation period, both statistically and economically significant, while the evidence on its effect on risk (standard deviations and idiosyncratic risk) is mixed. We find evidence that there is more fund outflow (or less fund inflow) for certain US hedge fund strategies after the implementation of Dodd–Frank. We show some differences in these findings dependent on fund size and strategy. The findings are robust to difference-in-differences analyses comparing US to non-US funds.

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Dodd-Franking the hedge Funds

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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Prizes

Best Paper Award for Dodd-Franking the Hedge Funds

Cite this