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Hedge funds and the housing bubble

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Listed:
  • Christos Giannikos
  • Hany Guirguis
  • Panagiotis Schizas

Abstract

This article documents that hedge funds specializing in subprime mortgages did not take advantage of the housing bubble and they did not trade against it. Hedge fund capitalization is an important factor regarding how funds suffered during the crisis. Small funds suffered the most. Mid-cap portfolio relied on macroeconomic indicators (subprime foreclosures) and, as a result, suffered less compared to their peers above. Duration and quality of the credit instruments are significant factors in explaining hedge fund returns. Naturally, our study, in line with the existing literature during turbulent periods, documents that the lack of liquidity was a key driver of performance.

Suggested Citation

  • Christos Giannikos & Hany Guirguis & Panagiotis Schizas, 2014. "Hedge funds and the housing bubble," Applied Financial Economics, Taylor & Francis Journals, vol. 24(16), pages 1063-1073, August.
    • Handle: RePEc:taf:apfiec:v:24:y:2014:i:16:p:1063-1073
    DOI: 10.1080/09603107.2014.909572
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    References listed on IDEAS

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    1. Kristopher Gerardi & Adam Hale Shapiro & Paul S. Willen, 2007. "Subprime outcomes: risky mortgages, homeownership experiences, and foreclosures," Working Papers 07-15, Federal Reserve Bank of Boston.
    2. Kristopher Gerardi & Adam Hale Shapiro & Paul S. Willen, 2008. "Summary of \"subprime outcomes: risky mortgages, homeownership experiences, and foreclosures\"," Proceedings 1091, Federal Reserve Bank of Chicago.
    3. Ashcraft, Adam B. & Schuermann, Til, 2008. "Understanding the Securitization of Subprime Mortgage Credit," Foundations and Trends(R) in Finance, now publishers, vol. 2(3), pages 191-309, June.
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