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A Law and Finance Analysis of Hedge Funds

Financial Management, Forthcoming

54 Pages Posted: 21 Feb 2007 Last revised: 10 Nov 2009

Douglas J. Cumming

York University - Schulich School of Business

Na Dai

State University of New York at Albany - School of Business & Center for Institutional Investment Management

Date Written: April 5, 2008

Abstract

This paper empirically analyzes the impact of hedge fund regulation on fund structure and performance. The data indicate restrictions on the location of key service providers and permissible distributions via wrappers are associated with lower fund alphas, lower average monthly returns, and higher fixed fees. Further, restrictions on the location of key service providers are associated with lower manipulation-proof performance measures, while wrapper distributions are associated with lower performance fees. As well, the data show standard deviations of monthly returns are lower among jurisdictions with restrictions on the location of key service providers and higher minimum capitalization requirements.

Keywords: Hedge Funds, Regulation, Law and Finance

JEL Classification: G23, G24, G28, K22

Suggested Citation

Cumming, Douglas J. and Dai, Na, A Law and Finance Analysis of Hedge Funds (April 5, 2008). Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=946298

Douglas Cumming (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Na Dai

State University of New York at Albany - School of Business & Center for Institutional Investment Management ( email )

1400 Washington Ave.
Albany, NY 12222
United States

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