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Do hedge funds time market tail risk? Evidence from option-implied tail risk

Title
Do hedge funds time market tail risk? Evidence from option-implied tail risk
Authors
Shin J.-S.Kim M.Oh D.Kim T.S.
Ewha Authors
신정순
SCOPUS Author ID
신정순scopus
Issue Date
2019
Journal Title
Journal of Futures Markets
ISSN
0270-7314JCR Link
Citation
Journal of Futures Markets vol. 39, no. 2, pp. 205 - 237
Keywords
fund performancehedge fundsoption-implied tail risktail risk timing
Publisher
Wiley-Liss Inc.
Indexed
SSCI; SCOPUS WOS scopus
Document Type
Article
Abstract
This paper focuses on an unexplored dimension of fund managers’ timing ability: Market-wide tail risk implied by information in options markets. Constructing the option-implied tail risk, we investigate whether hedge fund managers can strategically time the tail risk through adjusting their exposure to changes of it. Using an extensive sample of equity-oriented hedge funds, we find strong evidence of tail risk timing ability of hedge fund managers. Furthermore, tail risk timing ability brings significant economic value to investors. Top-ranked funds outperform bottom-ranked funds by 5–7% annually after adjusting for risk factors. Our results are robust to various robustness checks. © 2018 Wiley Periodicals, Inc.
DOI
10.1002/fut.21972
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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