Do Hedge Funds Exploit Rare Disaster Concerns?

• 成果类型: Article
• 署名作者: Gao, George P.; Gao, Pengjie; Song, Zhaogang
• 署名单位: Cornell University; University of Notre Dame; Johns Hopkins University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy027
• 发表日期: 2018
• 页码: 2650
• 关键词: STOCK RETURNS; cross-section; RISK; liquidity; MARKET; performance; volatility; equilibrium; management; momentum

摘要

We find hedge funds that have higher return covariation with a disaster concern index, which we develop through out-of-the-money puts on various economic sector indices, earn significantly higher returns in the cross-section. We provide evidence that these funds' managers are more skilled at exploiting the market's ex ante rare disaster concerns (SEDs), which may not be associated with disaster risk. In particular, high-SED funds, on average, outperform low-SED funds by 0.96% per month, but have less exposure to disaster risk. They continue to deliver superior future performance when SEDs are estimated using the disaster concern index purged of disaster risk premiums and have leverage-managing and extreme market-timing abilities.