In this study, we investigate the failure probability of hedge fund and fund-of-hedge funds due to financial distress. We establish survival (hazard) models to determine the covariates which contribute most to the survival and failure probabilities of hedge funds and funds-of-hedge funds. Further, we extend previous studies by constructing an out-of-sample forecast of probabilities of funds failure. Our results show that size, historical performances, strategies, fees, the lock-up period as well as the minimum investment requirements are the covariates that best explain hedge fund failure. As for funds-of-hedge funds, the fees and lockup period are less important. The estimated models exhibit satisfactory predictive accuracy in forecasting the most likely failed funds in an out-of-sample test. The predictive accuracy of the model is found to be robust to the impact of the GFC.
Keywords: Hedge funds; Funds-of-hedge funds; Hazard model; Funds failure; Predictive accuracy; Probability forecast
학회소식
[2012년 제 4차] Modelling and Forecasting Failure of Hedge Funds an
작성자 : 관리자
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게시일 :
2012-12-12
