This paper investigates the influence of hedging on firm value and stock return exposures in U.S. oil and gas industry from 1998 to 2004. Previous empirical results show that the relationship between firm value and corporate hedging activities is mixed. We find that the trend and volatility of oil and gas prices play important roles in the issue. Our results indicate that corporate exposures to oil and gas prices are asymmetric. We also find that gas reserve hedging has significant impacts on firm value when volatility of gas price is high. In conclusion, our results show that corporate hedging policies may add firm values in some special situations.

I examine local bias in hedge fund portfolio selection, using Section 13-F original and confidential holding filings. Using Coval and Moskowitz (1999) measure, I find that local bias is present among U.S.-based hedge funds. The holdings of funds are on average 20-67 km closer to hedge funds than the market. I also find that size and leverage of a company serve as determinants of local bias, with the preference of hedge funds for smaller and more levered local companies. I suggest an alternative model for assessment of local bias that yields results further supporting the hypothesis of the existence of local bias among hedge funds. I do not find a positive effect of local bias on performance. Moreover, in some periods I find a strong negative effect of local bias both on raw and risk-adjusted returns. I argue that these findings suggest that the origins of local bias should not be looked for in information asymmetry, and rather may be attributed to perceived informational advantage, flight to familiarity, and some endogenous factors of hedge fund locality.

Consistent with the well-documented relation between political orientation and psychological traits, hedge funds' political orientations are related to their portfolio decisions. Relative to politically conservative hedge funds, politically liberal hedge funds exhibit a preference for smaller stocks, less mature companies, volatile stocks, unprofitable companies, non-dividend paying companies, and lottery-type securities. Politically liberal hedge funds are also more likely to enter new positions or fully exit existing positions, and make larger adjustments to their U.S. equity market exposure. Our results suggest that psychological characteristics can influence the portfolio decisions of even those at the very top of the financial sophistication ladder.

The high-water mark provision in hedge fund managers' compensation raises concerns of investors, because they are worried about that fund managers would take unnecessarily high risk in the fund investment. In this paper, we theoretically analyze the optimal strategies for hedge fund managers who choose to maximize the expected power utility from fees in both discrete-time and continuous- time models. The results show that when approaching the fee payment date, hedge fund managers would take as much risk as they are allowed to in the fund investment. However, if hedge fund managers are given more time, they tend to be more conservative. In the continuous-time model, the optimal allocation of the fund in the risky asset depends on market conditions, which are measured by the state price density.

Thesis advisor: Peter Ireland / We study historical hedge fund performance characteristics with a particular focus on the 2007 – 2009 Financial Crisis (the “Crisis”). Using the Credit Suisse Hedge Fund Indexes as proxies for broader hedge fund industry performance, we apply a factor model based on common investment strategies to determine if the broad industry or any particular hedge fund strategies have been able to deliver excess returns, or alpha. We find evidence that the broad hedge fund index did deliver statistically significant excess monthly returns of 0.39% (4.67% annualized) over the period January 1995 – January 2016, with seven of ten individual strategy indexes contributing. However, our results indicate that these excess returns were delivered primarily during the pre-Crisis period of January 1995 – November 2007. Over this period, the broad index delivered statistically significant monthly excess returns of 0.49% (5.93% annualized), with six of ten individual strategy indexes contributing. Our results do not indicate, however, that hedge funds delivered statistically significant monthly excess returns over the period December 2007 – June 2009 or over the period December 2007 – December 2012, which takes into account the uniquely drawn out recovery from the Crisis. We find that the broad index delivered statistically significant excess monthly returns of 0.23% (2.74% annualized) during the post-Crisis period, though these returns are less than half of the pre-Crisis period returns and only three individual strategy indexes contributed. We posit that this apparent shift in performance characteristics might be the result of a shift in the risk tolerances of hedge fund investors and managers following the Crisis. We conclude that, while hedge funds might certainly serve legitimate purposes in financial markets, they are not immune to financial crises, especially those as severe as the Crisis. / Thesis (BA) — Boston College, 2016. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Arts and Sciences Honors Program. / Discipline: Economics.

This study examines the performance of recently introduced passively-managed exchange-traded hedged funds (HETFs). Using data that cover the period 2008 to 2017 of all available HETFs under global macro and long-short classifications with sufficient number of observations, the study provides the most complete and update measure and documentation of the performance of these two fund categories. Little research has been done on HETFs' performance in despite of the rapid growth and expected future expansion of their market sizes, since the introduction of HETFs expands for ordinary investors investment opportunity set that were only available to high net wealth individuals and institutions. Using a simple 3-three factor model including equity, bond and volatility factors, it shows long-short HETFs cannot closely follow the returns of their corresponding indexes as global macro HETFs. By using Fung and Hsieh's (2004) 7-factor model, and Edelman, Fung and Hsieh's (2012) revised 8-factor model, significant negative alphas are found for strategy portfolios. The relatively poor performance of the HETFs can be attributed to their high expense ratio and their failure to closely track the benchmark index.

Hedge fund investing is a relatively new phenomenon in Sweden. The first Swedish hedge fund was started in 1996. This new financial sector has since showed a steady growth. Due to the novelty of hedge fund phenomena, it is right to ask whether the investors are prepared for this kind of investments; how they choose their hedge funds investments and whether they have adequate knowl-edge in the field. This thesis provides a mapping of the investors’ behavior regarding hedge fund investments. We have concluded that Swedish hedge fund investors have a limited basis of knowledge required to fully utilize hedge funds in their portfolios.

Hedge funds are private investment funds characterized by unconventional strategies. This thesis employed multi-factor CAPM to evaluate the performance, or manager skill of hedge funds investment segments by using CSFB/Tremont Hedge Fund Indices from January 1994 to September 2005. The performance evaluation is based on the concept of ¡°Jansen¡¯s alpha¡±, which is estimated by applying Generalized Method of Moment. The finding is that hedge funds industry in general displayed the ability to outperform market proxy. Global Macro shows the strongest manager skill, followed by Event Driven, Equity Market Neutral and Long/Short Equity. This thesis also investigates the consistency of hedge funds performance over market environment. It was discovered that the hedge funds industry in general and all the sub-category investment segments except Convertibly Arbitrage, Emerging Market and Fix income Arbitrage displayed the ability to cushion the impact of financial shocks.

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<p>Hedge fund investing is a relatively new phenomenon in Sweden. The first Swedish hedge fund was started in 1996. This new financial sector has since showed a steady growth.</p><p>Due to the novelty of hedge fund phenomena, it is right to ask whether the investors are prepared for this kind of investments; how they choose their hedge funds investments and whether they have adequate knowl-edge in the field.</p><p>This thesis provides a mapping of the investors’ behavior regarding hedge fund investments. We have concluded that Swedish hedge fund investors have a limited basis of knowledge required to fully utilize hedge funds in their portfolios.</p>