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Recovering Delisting Returns of Hedge Funds

Published online by Cambridge University Press:  11 August 2014

James E. Hodder
Affiliation:
jhodder@bus.wisc.edu, School of Business, University of Wisconsin, 975 University Ave, Madison, WI 53706
Jens Carsten Jackwerth
Affiliation:
jens.jackwerth@uni-konstanz.de, Department of Economics, University of Konstanz, PO Box 134, Konstanz 78457, Germany
Olga Kolokolova
Affiliation:
olga.kolokolova@mbs.ac.uk, Manchester Business School, University of Manchester, Booth St W, Manchester M15 6PB, United Kingdom.

Abstract

Numerous hedge funds stop reporting each year to commercial databases, wreaking havoc with analyzing investment strategies that incur the unobserved delisting return. We use estimated portfolio holdings for funds-of-funds to back out estimated hedge-fund delisting returns. For all exiting funds, the estimated mean delisting return is insignificantly different from the average monthly return for live hedge funds. However, funds with poor prior performance and no clearly stated delisting reason had a significantly negative estimated mean delisting return of -5.97%, suggesting that a shock to their returns “tips them over the edge” and leads to delisting.

Type
Research Articles
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2014 

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