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The Valuation of Hedge Funds' Equity PositionsGjergji CiciCollege of William and Mary - Mason School of Business Alexander KempfUniversity of Cologne - Department of Finance & Centre for Financial Research (CFR) Alexander PuetzUniversity of Cologne - Department of Finance; University of Cologne - Centre for Financial Research (CFR) May 16, 2013 AFA 2012 Chicago Meetings Paper Abstract: We provide evidence on the valuation of equity positions by hedge funds. Reported valuations deviate from standard valuations based on closing prices from CRSP for roughly seven percent of the positions. These equity valuation deviations are positively related to illiquidity and price volatility of the underlying stocks. They respond to past performance and intensify after an advisor starts reporting to a commercial database. Furthermore, advisors with more valuation deviations show a stronger discontinuity in their reported returns around zero, manage a higher fraction of potentially fraudulent funds, report smoother returns, and exhibit an upward spike in their December reported returns.
Number of Pages in PDF File: 47 Keywords: Hedge Funds, Return Management, Valuation Deviations JEL Classification: G23, G28 working papers seriesDate posted: August 24, 2010 ; Last revised: June 3, 2013Suggested CitationContact Information
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