Does Size Matter in Predicting Hedge Funds' Liquidation?

39 Pages Posted: 6 Mar 2019

See all articles by Adrien Becam

Adrien Becam

Banque de France

Andros Gregoriou

University of Brighton

Jairaj Gupta

University of Birmingham

Date Written: March 2019

Abstract

In this study, we propose a set of covariates that exploit the 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 the statistical significance of factors affecting their liquidation varies across different size categories.

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

Suggested Citation

Becam, Adrien and Gregoriou, Andros and Gupta, Jairaj, Does Size Matter in Predicting Hedge Funds' Liquidation? (March 2019). European Financial Management, Vol. 25, Issue 2, pp. 271-309, 2019, Available at SSRN: https://ssrn.com/abstract=3345998 or http://dx.doi.org/10.1111/eufm.12159

Adrien Becam (Contact Author)

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

Jairaj Gupta

University of Birmingham ( email )

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

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