Hedge Fund Leverage
Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)
Columbia Business School
Greg Van Inwegen
Citi Private Bank
July 5, 2010
We investigate the leverage of hedge funds using both time-series and cross-sectional analysis. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early 2009 when the leverage of investment banks is highest. Changes in hedge fund leverage tend to be more predictable by economy-wide factors than by fund-specific characteristics. In particular, decreases in funding costs and increases in market values forecast increases in hedge fund leverage. Decreases in fund return volatilities also increase leverage.
Number of Pages in PDF File: 54
Keywords: capital structure, long-short positions, exposure, hedging, systemic risk
JEL Classification: G11, G18, G23, G32working papers series
Date posted: August 2, 2010 ; Last revised: June 15, 2011
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo5 in 0.390 seconds