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Are Investors Better Off with Small Hedge Funds in Times of Crisis?

27 Pages Posted: 14 Jul 2015  

Andrew Clare

City University London - Sir John Cass Business School

Dirk Nitzsche

City University London - Sir John Cass Business School

Nick Motson

City University London - Sir John Cass Business School

Date Written: July 14, 2015

Abstract

With the benefit of a more comprehensive dataset than previous authors in this area, in this paper we revisit the relationship between hedge fund performance and size. Our results indicate that there is a strong, negative relationship between hedge fund performance and size. But, in addition, we also find that rather than dissipating during the two recent periods of financial crisis, other things equal, investors would have been better off with smaller hedge funds than with large ones during these crisis periods. Finally, we also document clear cross-sectional variation in this relationship by broad hedge fund strategy.

Keywords: Hedge fund performance, Size, Age

JEL Classification: G20

Suggested Citation

Clare, Andrew and Nitzsche, Dirk and Motson, Nick, Are Investors Better Off with Small Hedge Funds in Times of Crisis? (July 14, 2015). Available at SSRN: https://ssrn.com/abstract=2630749 or http://dx.doi.org/10.2139/ssrn.2630749

Andrew D. Clare

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Dirk Nitzsche (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Nicholas E. Motson

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 (0) 20 7040 4074 (Phone)
+44 (0) 20 7040 8881 (Fax)

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