Hedge Fund Return Dependence: Model Misspecification or Liquidity Spirals?
AffiliationUniv Arizona, Eller Coll Management
MetadataShow full item record
PublisherCAMBRIDGE UNIV PRESS
CitationHedge Fund Return Dependence: Model Misspecification or Liquidity Spirals? 2017, 52 (05):2157 Journal of Financial and Quantitative Analysis
RightsCOPYRIGHT: © Michael G. Foster School of Business, University of Washington 2017
Collection InformationThis item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at firstname.lastname@example.org.
AbstractWe test whether model misspecification or liquidity spirals primarily explain the observed excess dependence in filtered (for economic fundamentals) hedge fund index returns and the links between volatility, liquidity shocks, and hedge fund return clustering. Evidence supports the model misspecification hypothesis: i) hedge fund filtered return clustering is symmetric, ii) filtered Short Bias fund returns exhibit negative dependence with filtered returns for other hedge fund types, iii) negative liquidity shocks are associated with clustering in both tails and market volatility subsumes the role of negative liquidity shocks, and iv) these same patterns appear in size-sorted equity portfolios.
Note12 month embargo; Published online: 02 October 2017
VersionFinal published version