Macroeconomic risk and hedge fund returns
Type :
Article
Publication Status :
published
Access :
restrictedAccess
Abstract
This paper estimates hedge fund and mutual fund exposure to newly proposed measures of macroeconomic risk that are interpreted as measures of economic uncertainty. We find that the resulting uncertainty betas explain a significant proportion of the cross-sectional dispersion in hedge fund returns. However, the same is not true for mutual funds, for which there is no significant relationship. After controlling for a large set of fund characteristics and risk factors, the positive relation between uncertainty betas and future hedge fund returns remains economically and statistically significant. Hence, we argue that macroeconomic risk is a powerful determinant of cross-sectional differences in hedge fund returns.
Source :
Journal of Financial Economics
Date :
2014-10
Volume :
114
Issue :
1
Publisher :
Elsevier
URI
http://hdl.handle.net/10679/520http://www.sciencedirect.com/science/article/pii/S0304405X14001354#
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