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Hedge Fund Survival: Non‐Normal Returns, Capital Outflows, And Liquidity

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  • Naohiko Baba
  • Hiromichi Goko

Abstract

We analyze the factors that influence the survival probability of hedge funds reported in the Lipper TASS database. Particular emphasis is placed on (1) non‐normality of returns and assets under management (AUM), (2) short‐term capital outflows, and (3) liquidity constraints associated with a hedge fund's cancellation policy. Estimation results using the Cox proportional hazards model and the panel logit model show that (1) funds with lower skewness in returns and AUM, (2) funds experiencing instantaneous rapid capital outflows, and (3) funds with a shorter redemption notice period and a higher redemption frequency have significantly higher liquidation probabilities, among others.

Suggested Citation

  • Naohiko Baba & Hiromichi Goko, 2009. "Hedge Fund Survival: Non‐Normal Returns, Capital Outflows, And Liquidity," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 32(1), pages 71-93, March.
    • Handle: RePEc:bla:jfnres:v:32:y:2009:i:1:p:71-93
    DOI: 10.1111/j.1475-6803.2008.01243.x
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    References listed on IDEAS

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    Cited by:

    1. Judy Qiu & Leilei Tang & Ingo Walter, 2018. "Hedge fund incentives, management commitment and survivorship," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 32(2), pages 115-142, May.
    2. Adrien Becam & Andros Gregoriou & Jairaj Gupta, 2019. "Does size matter in predicting hedge funds' liquidation?," European Financial Management, European Financial Management Association, vol. 25(2), pages 271-309, March.
    3. Tokuo Iwaisako, 2010. "Global Financial Crisis, Hedge Funds, and the Shadow Banking System," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(3), pages 347-368, March.

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