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Survival of Hedge Funds: Frailty vs Contagion

Darolles, Serge; Gouriéroux, Christian; Gagliardini, Patrick (2011), Survival of Hedge Funds: Frailty vs Contagion, International Conference on Stochastic Analysis and Applications, 2011-10, Hammamet, Tunisie

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Type
Communication / Conférence
Date
2011
Conference title
International Conference on Stochastic Analysis and Applications
Conference date
2011-10
Conference city
Hammamet
Conference country
Tunisie
Pages
54
Metadata
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Author(s)
Darolles, Serge
Gouriéroux, Christian
Gagliardini, Patrick
Abstract (EN)
The rather short lifetimes of a majority of hedge funds and the reasons of their liquidation explain the interest of investors and academics in hedge fund survival analysis. In this paper we are interested in the dependence between liquidation risks of individual hedge funds. This dependence can either result from common exogenous shocks (frailty), or be due to contagion phenomena, which occur when an endogenous behaviour of a fund manager impacts the Net Asset Values of other funds. We introduce dynamic models able to distinguish between frailty and contagion phenomena, and to test for the presence and magnitude of such dependence effects, according to the age and management style of the fund.
Subjects / Keywords
Hedge funds; Autoregressive Gamma Process; Contagion Dynamic Count Model; Frailty; Liquidation Correlation
JEL
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
C23 - Panel Data Models; Spatio-temporal Models