Who is smarter? Evidence from extreme financial risk contagion in hedge funds and mutual funds

IF 3.8 3区经济学 Q1 BUSINESS, FINANCE North American Journal of Economics and Finance Pub Date : 2024-09-07 DOI:10.1016/j.najef.2024.102283

Changqing Luo , Xinxin Fu , Carl R. Chen , Liang Dong

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Abstract

We investigate the extreme risk contagion of hedge funds and mutual funds, thereby comparing their performance, and studying whether hedge funds are smarter than mutual funds or vice versa. We construct the Copula-CoVaR model to measure the dynamic and nonlinear extreme risk contagion of hedge funds and mutual funds from January 1994 to April 2020. Our findings suggest that compared with mutual funds, hedge funds are subject to lower extreme risk contagion and offer higher average returns. This outperformance is robust in different crisis periods. Moreover, although almost all types of hedge funds outperform mutual funds, the characteristics of hedge funds have a different impact on the outperformance. Specifically, hedge funds adopting strategies of long/short equity hedge, event-driven, funds of funds, emerging markets, equity market neutral, multi-strategy, and global macro, funds with moderate activism, and illiquid hedge funds are smarter than mutual funds from the perspective of extreme risk contagion.

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谁更聪明？对冲基金和共同基金极端金融风险传染的证据

我们研究对冲基金和共同基金的极端风险传染，从而比较它们的表现，研究对冲基金是否比共同基金更聪明，反之亦然。我们构建了 Copula-CoVaR 模型来衡量对冲基金和共同基金在 1994 年 1 月至 2020 年 4 月期间的动态和非线性极端风险传染。我们的研究结果表明，与共同基金相比，对冲基金受到的极端风险传染较低，平均回报较高。在不同的危机时期，这种超额收益都是稳健的。此外，尽管几乎所有类型的对冲基金的表现都优于共同基金，但对冲基金的特征对其表现有不同的影响。具体而言，从极端风险传染的角度来看，采用多空股票对冲、事件驱动、基金中的基金、新兴市场、股票市场中性、多策略和全球宏观等策略的对冲基金、适度激进的基金以及非流动性对冲基金比共同基金更聪明。

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来源期刊

North American Journal of Economics and Finance Multiple-

CiteScore

7.30

自引率

8.30%

发文量

168

期刊介绍： The focus of the North-American Journal of Economics and Finance is on the economics of integration of goods, services, financial markets, at both regional and global levels with the role of economic policy in that process playing an important role. Both theoretical and empirical papers are welcome. Empirical and policy-related papers that rely on data and the experiences of countries outside North America are also welcome. Papers should offer concrete lessons about the ongoing process of globalization, or policy implications about how governments, domestic or international institutions, can improve the coordination of their activities. Empirical analysis should be capable of replication. Authors of accepted papers will be encouraged to supply data and computer programs.