Do hedge funds have enough capital? A value-at-risk approach [An article from: Journal of Financial Economics]

This digital document is a journal article from Journal of Financial Economics, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
We examine the risk characteristics and capital adequacy of hedge funds through the Value-at-Risk approach. Using extensive data on nearly 1,500 hedge funds, we find only 3.7% live and 10.9% dead funds are undercapitalized as of March 2003. Moreover, the undercapitalized funds are relatively small and constitute a tiny fraction of total fund assets in our sample. Cross-sectionally, the variability in fund capitalization is related to size, investment style, age, and management fee. Hedge fund risk and capitalization also display significant time variation. Traditional risk measures like standard deviation or leverage ratios fail to detect these trends.