Abstract

http://ssrn.com/abstract=424370
 
 

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Citations (32)



 


 



Do Hedge Funds Have Enough Capital? A Value-at-Risk Approach


Anurag Gupta


Case Western Reserve University - Department of Banking & Finance

Bing Liang


University of Massachusetts at Amherst - Department of Finance & Operations Management; China Academy of Financial Research (CAFR)

April 2004

EFA 2003 Annual Conference Paper No. 376

Abstract:     
We examine the risk characteristics and capital adequacy of hedge funds through the Value-at-Risk approach. Using extensive data on nearly fifteen hundred hedge funds, we find that only 3.7% live and 10.9% dead funds are under-capitalized as of March 2003. Moreover, the under-capitalized funds are relatively small and constitute a tiny fraction of the total fund assets in our sample. Cross-sectionally, the variability in fund capitalization is related to size, investment style, age, and management fee. Hedge fund risk and capitalization also display significant time variation. Traditional risk measures like standard deviation or leverage ratios fail to detect these trends.

Note: Previously titled "Do Hedge Funds Have Enough Capital? A Value-at-Risk Approach"

Number of Pages in PDF File: 40

Keywords: Hedge funds, Value-at-Risk, Capital adequacy, Extreme value theory, Monte Carlo simulation.

JEL Classification: G23, G28, G29

working papers series


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Date posted: August 3, 2003  

Suggested Citation

Gupta, Anurag and Liang, Bing, Do Hedge Funds Have Enough Capital? A Value-at-Risk Approach (April 2004). EFA 2003 Annual Conference Paper No. 376. Available at SSRN: http://ssrn.com/abstract=424370 or http://dx.doi.org/10.2139/ssrn.424370

Contact Information

Anurag Gupta (Contact Author)
Case Western Reserve University - Department of Banking & Finance ( email )
10900 Euclid Ave.
Cleveland, OH 44106-7235
United States
216-368-2938 (Phone)
216-368-4776 (Fax)
Bing Liang
University of Massachusetts at Amherst - Department of Finance & Operations Management ( email )
Amherst, MA 01003
United States
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

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