TY - JOUR

T1 - A Time to Scatter Stones, and a Time to Gather Them

T2 - Annual Cycle in Hedge Fund Risk Taking

AU - Kolokolova, Olga

AU - Mattes, Achim

PY - 2018/11/30

Y1 - 2018/11/30

N2 - Analyzing a sample of hedge fund daily returns from Bloomberg, we find a seasonal pattern in their risk taking. During earlier months of a year, poorly performing funds reduce risk. The reduction is stronger for funds with higher management fees, shorter redemption periods, and recently deteriorating performance, consistent with a managerial aversion to early fund liquidation. Toward the end of a year, poorly performing funds gamble for resurrection by increasing risk. It is largely achieved by increasing exposure to market factors, and can be linked to stronger indirect managerial incentives during the second half of a year.

AB - Analyzing a sample of hedge fund daily returns from Bloomberg, we find a seasonal pattern in their risk taking. During earlier months of a year, poorly performing funds reduce risk. The reduction is stronger for funds with higher management fees, shorter redemption periods, and recently deteriorating performance, consistent with a managerial aversion to early fund liquidation. Toward the end of a year, poorly performing funds gamble for resurrection by increasing risk. It is largely achieved by increasing exposure to market factors, and can be linked to stronger indirect managerial incentives during the second half of a year.

U2 - 10.1111/fire.12169

DO - 10.1111/fire.12169

M3 - Journal article

VL - 53

SP - 669

EP - 704

JO - The Financial Review

JF - The Financial Review

SN - 1540-6288

IS - 4

ER -