Does Size Matter in Predicting Hedge Funds’ Liquidation?

European Financial Management (Forthcoming)

50 Pages Posted: 4 Nov 2016 Last revised: 16 Oct 2017

See all articles by Jairaj Gupta

Jairaj Gupta

University of Birmingham

Adrien Becam

Banque de France

Andros Gregoriou

University of Brighton

Date Written: October 16, 2017

Abstract

In this study, we propose a set of covariates that exploit information content of hedge funds’ relative size, performance, growth, tail risk, and past liquidation rate, in predicting their liquidation. Empirical results show that our proposed covariates exhibit significant predictive power for up to two years even when we control for fund specific characteristics. Furthermore, we estimate separate liquidation prediction models for small, medium, and large funds. Our findings suggest that liquidation likelihood of hedge funds is inversely related to fund size, and statistical significance of factors affecting their liquidation vary across different size categories.

Keywords: hedge fund; liquidation; size; failure; default

JEL Classification: G11; G17; G33

Suggested Citation

Gupta, Jairaj and Becam, Adrien and Gregoriou, Andros, Does Size Matter in Predicting Hedge Funds’ Liquidation? (October 16, 2017). European Financial Management (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2863911 or http://dx.doi.org/10.2139/ssrn.2863911

Jairaj Gupta (Contact Author)

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom
00-44-7795904913 (Phone)

Adrien Becam

Banque de France ( email )

31 rue Croix des Petits-Champs
Paris Cedex 01, 75049
France

Andros Gregoriou

University of Brighton ( email )

Brighton
Brighton, BN2 4AT
United Kingdom

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