{"title":"Who is smarter? Evidence from extreme financial risk contagion in hedge funds and mutual funds","authors":"","doi":"10.1016/j.najef.2024.102283","DOIUrl":null,"url":null,"abstract":"<div><p>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.</p></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.8000,"publicationDate":"2024-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"North American Journal of Economics and Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1062940824002080","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
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.
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.
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