Short selling risk and hedge fund performance

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Title Short selling risk and hedge fund performance
Publication Type dissertation
School or College David Eccles School of Business
Department Business
Author Ma, Lei
Date 2018
Description Hedge funds, on average, outperform other actively managed funds. However, hedge fund managers often use trading strategies that are not used by other managed portfolios, and thus they bear unique risks. In particular, many hedge funds use short selling. I construct an option-based measure of short selling risk as the return spread between the decile of stocks with low option-implied short selling fees and the decile of those with high fees. I find that hedge funds that are significantly exposed to short selling risk outperform low-exposure funds by 0.45% per month on a risk-adjusted basis. However, there is no such relation for mutual funds that invest primarily on the long side. The results highlight that a significant proportion of abnormal performance of hedge funds is compensation for the risk they take on their short positions.
Type Text
Publisher University of Utah
Dissertation Name Doctor of Philosophy
Language eng
Rights Management (c) Lei Ma
Format application/pdf
Format Medium application/pdf
ARK ark:/87278/s609jsqe
Setname ir_etd
ID 1765186
Reference URL https://collections.lib.utah.edu/ark:/87278/s609jsqe
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