Resource type
Date created
2014-12
Authors/Contributors
Author: Wang, Qiaochu
Author: Wang, Yihui
Abstract
This paper studies the risk profile and capital adequacy of hedge funds by extending the sample period used in the research of Gupta and Liang (2005). We apply a VaR-based approach to evaluate over 6,000 hedge funds from the Lipper Tass Academic Hedge Fund Database, including live funds and graveyard funds, and find that only a small percentage of them are undercapitalized as of September 2014. By conducting a cross-sectional regression of fund capitalization on various characteristics of hedge funds, we reach a conclusion that whether a hedge fund is adequately capitalized is related to its age and investment style. Standard deviation and leverage ratio often underestimate the market risk hedge funds face, whereas VaR-based measures successfully capture both static and dynamic risk profile of hedge funds.
Document
Description
MSc in Finance Project-Simon Fraser University
Copyright statement
Copyright is held by the author(s).
Scholarly level
Peer reviewed?
No
Language
English
Member of collection
| Download file | Size |
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