Journal of Financial Economics Vol. 102 No. 1 2011
Hedge fund leverage
Abstract
We investigate the leverage of hedge funds in the time series and cross-section. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early 2009 when the market leverage of investment banks is highest. Changes in hedge fund leverage tend to be more predictable by economy-wide factors than by fund-specific characteristics. In particular, decreases in funding costs and increases in market values both forecast increases in hedge fund leverage. Decreases in fund return volatilities predict future increases in leverage.
- DOI
- 10.1016/j.jfineco.2011.02.020
- Volume
- 102
- Issue
- 1
- Pages
- 102-126
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex