Presented by

Professor Gavin Cassar, PhD
The Wharton School
University of Pennsylvania

Abstract
We investigate the methods that hedge funds use to manage portfolio risk. We find that levered funds are more likely to use formal models to evaluate portfolio risk and funds with higher levels of proprietary capital are more likely to have dedicated risk officers and risk officers with no trading authority. Consistent with risk management practices reducing left tail risk, funds in our sample that use formal models performed significantly better in the extreme down months of 2008. Moreover, funds employing value at risk had more accurate expectations of how they would perform in a short-term equity bear market. Overall, our results suggest that models of portfolio risk increase the accuracy of managers’ expectations and assist managers in reducing exposures to downside risk.
 

When

23 March 2012
12:00pm – 1:00pm

Where

University Centre, BLD (06_03_23)
Bond University

Contact Information

Catherine Smith
Database and Research Support
Faculty of Business
Telephone: +61 7 5595 55721
Bond University | Gold Coast, Queensland, 4229, Australia