Does Size Matter in Predicting Hedge Funds’ Liquidation?

Jairaj Gupta, Adrien Becam, Andros Gregoriou

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Abstract

In this study, we propose a set of covariates that exploit information content of hedge funds’ relative size, performance, growth, tail risk, and past liquidation rate, in predicting their liquidation. Empirical results show that our proposed covariates exhibit significant predictive power for up to two years even when we control for fund specific characteristics. Furthermore, we estimate separate liquidation
prediction models for small, medium, and large funds. Our findings suggest that liquidation likelihood of hedge funds is inversely related to fund size, and statistical significance of factors affecting their liquidation vary across different size categories.
Original languageEnglish
JournalEuropean Financial Management
Early online date16 Oct 2017
Publication statusE-pub ahead of print - 16 Oct 2017

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Keywords

  • hedge fund
  • liquidation
  • fund size
  • failure
  • default

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