Does Size Matter in Predicting Hedge Funds’ Liquidation?

Research output: Contribution to journalArticlepeer-review

Authors

External organisations

  • Department of Finance, Université Paris Dauphine
  • University of Brighton

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.

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Details

Original languageEnglish
JournalEuropean Financial Management
Early online date16 Oct 2017
Publication statusE-pub ahead of print - 16 Oct 2017

Keywords

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