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Oulun yliopiston väitöskirjat

ESSAYS ON HEDGE FUND PERFORMANCE AND RISK, ACTA UNIVERSITATIS OULUENSIS G Oeconomica 46

ISBN-13:	978-951-42-6302-6
Kieli:	englanti
Kustantaja:	Oulun yliopisto
Oppiaine:	Talous
Painosvuosi:	2010
Sidosasu:	pehmeäkantinen
Sijainti:	Print Tietotalo
Sivumäärä:	213
Tekijät:	JOENVÄÄRÄ JUHA

25.00 €

This doctoral thesis aims to contribute to the literature on hedge fund performance and risk byconducting four interrelated essays. The first two essays measure and predict hedge fundperformance using novel methodologies based on recent development in portfolio choicetechniques. This new way to evaluate fund performance relies on economic theory and robusteconometric principles. The first essay exploits hedge fund characteristics in order to pick rightfunds into a portfolio, whereas the second essay predicts hedge fund performance usingconditional information that is contained in macroeconomic variables. The empirical analysisshows that the proposed conditional real-time portfolio strategies deliver significantoutperformance over the unconditional benchmark strategy which does not utilize conditionalinformation. The third essay investigates whether a particular hedge fund with specific fund characteristicscontributes to systemic risk and how hedge funds with a high systemic risk contribution performduring the times of financial distress. The findings suggest that the fund’s capital structure isrelated to its systemic risk contribution, and, furthermore, that hedge funds with a high systemicrisk contribution tend to deliver extremely poor performance during the times of financial distress. The fourth essay examines the impact of share restrictions on hedge fund performance and risk-taking. The essay finds that hedge funds with a lockup period tend to take excess risk that is notcompensated when performance is measured as a unit of risk taken by the hedge fund. In addition,the length of notice periods increases along with the illiquidity level of fund investments. Finally,hedge funds with a long notice period seem to be able to earn an illiquidity premium.

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