Lecture: A New Look at Hedge Fund Tournament Behaviors
October 9, 2009
1:30 - 3:00pm
Location: | SOM 112 (wheelchair accessible) |
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Contact: |
Thomas O'Brien, (413) 545-5581, tobrien@som.umass.edu |
Finance Ph.D. Candidate Gong "Mike" Zhan will be the guest speaker at this week's Finance Seminar. All are invited to attend.
Topic: A New Look at Hedge Fund Tournament Behaviors
Abstract: Existing literature has documented the "tournament behavior" amount asset managers-that is, mid-year underperformers tend to take relatively higher risk than strategy peers in the second half-year, in hope of springing back at the year-end. We reexamine this risk-taking behavior among hedge fund managers in more stringent statistical settings by conducting two strong-form tests, one at the fund level and the other at the risk style level. The tournament behavior disappears in both tests. One reason is that the convexity between performance ranking and capital inflows is less severe among hedge fund industry than mutual fund industry due to varies share restrictions hedge funds usually impose. Another reason is that some hedge fund risk strategies are subject to significant capacity constraints and therefore managers have weak appetite for additional capital.
