Crowded Trades and Tail Risk

• 成果类型: Article
• 署名作者: Brown, Gregory W.; Howard, Philip; Lundblad, Christian T.
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; Wake Forest University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab107
• 发表日期: 2022
• 页码: 3231
• 关键词: asset fire sales; Hedge funds; cross-section; Return predictability; liquidity risk; equilibrium; performance; purchases; contagion; DYNAMICS

摘要

Hedge fund positions are an important component of crowded trades. These vehicles are particularly active, take highly concentrated positions, and utilize leverage and short sales. Using a database of hedge fund holdings, we measure the degree of security-level crowdedness. The difference between the average returns on portfolios sorted by high versus low crowdedness portfolios is sizable, and the variation in the realized portfolio returns is distinct from other traditional risk factors. Further, hedge fund exposures to crowdedness are often significant, and they help to explain downside tail risk, as funds with higher exposures experience relatively larger drawdowns during periods of industry distress.