We study whether and how the performance and factor exposures of the hedge fund (HF) industry as a whole and of 10 common HF strategies have been affected by unconventional monetary policy (UMP) announcements by the Federal Reserve and the European Central Bank. Using event studies, we find that UMP announcements are a highly significant risk exposure shifter for Dedicated Short Bias, Equity Market Neutral, Event Driven, and Multi-Strategy strategies as well as the aggregate HF index. We further show that the UMP affects HFs’ performance through significant changes in the betas of conventional HF risk factors. Our results for the aggregate and style indices are corroborated by an augmented Fama-French five-factor model, tests for breaks in US and Eurozone shadow rates, and analyses of more granular individual HF data.

Factor exposures of hedge fund strategies and unconventional monetary policy shocks

Guidolin, Massimo
;
In corso di stampa

Abstract

We study whether and how the performance and factor exposures of the hedge fund (HF) industry as a whole and of 10 common HF strategies have been affected by unconventional monetary policy (UMP) announcements by the Federal Reserve and the European Central Bank. Using event studies, we find that UMP announcements are a highly significant risk exposure shifter for Dedicated Short Bias, Equity Market Neutral, Event Driven, and Multi-Strategy strategies as well as the aggregate HF index. We further show that the UMP affects HFs’ performance through significant changes in the betas of conventional HF risk factors. Our results for the aggregate and style indices are corroborated by an augmented Fama-French five-factor model, tests for breaks in US and Eurozone shadow rates, and analyses of more granular individual HF data.
In corso di stampa
2025
Guidolin, Massimo; Orlov, Alexei G.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4078198
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