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Incentives and Risk Taking in Hedge Funds

In: Investing in the Modern Age

Author

Listed:
  • Rachel E. S. Ziemba

    (Roubini Global Economics, UK)

  • William T. Ziemba

    (University of British Columbia, Canada)

Abstract

There are a number of studies in the literature concerning hedge fund performance and their use in diversified multi-strategy portfolios. The key is to find outstanding hedge funds that generate consistent high returns. Examples are in Ziemba and Ziemba (2007). Here we just discuss average hedge funds. Given the high fees that average 2+20, it is a challenge to make back these fees and have enough left to have outstanding net gains. Kouwenberg and Ziemba (2007) did an empirical study using 2078 hedge funds Universe, formerly knows as the MAR hedge fund database, provided by Zurich Captial markets; see Table 5.1. The database includes a large number of funds that have disappeared over the years, which reduces the impact of survivorship bias. They analyzed the data from January 1995 to November 2000 were 772 alive hedge funds and 470 dead hedge funds- observe the high number of failures! For the funds of, there were 307 alive and a full 144 dead …

Suggested Citation

  • Rachel E. S. Ziemba & William T. Ziemba, 2013. "Incentives and Risk Taking in Hedge Funds," World Scientific Book Chapters, in: Investing in the Modern Age, chapter 5, pages 45-53, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814504751_0005
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    Cited by:

    1. Yang, Elaine Chiao Ling & Khoo-Lattimore, Catheryn & Arcodia, Charles, 2017. "A systematic literature review of risk and gender research in tourism," Tourism Management, Elsevier, vol. 58(C), pages 89-100.
    2. Lange, Anne, 2019. "Does cargo matter? The impact of air cargo operations on departure on-time performance for combination carriers," Transportation Research Part A: Policy and Practice, Elsevier, vol. 119(C), pages 214-223.

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