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Hedge Fund Leverage

Andrew Ang

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Sergiy Gorovyy

Ellington Management Group

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, G32

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Date posted: August 2, 2010 ; Last revised: June 15, 2011

Suggested Citation

Ang, Andrew and Gorovyy, Sergiy and van Inwegen, Greg, Hedge Fund Leverage (July 5, 2010). Available at SSRN: https://ssrn.com/abstract=1635284 or http://dx.doi.org/10.2139/ssrn.1635284

Contact Information

Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Sergiy Gorovyy
Ellington Management Group ( email )
53 Forest Avenue
Ellington Management Group
Old Greenwich, CT CT 06870
United States
Greg Van Inwegen
Citi Private Bank ( email )
200 First Stamford Place
2nd Floor
Stamford, CT 06902
United States
203.961.6080 (Phone)
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