Topic
Hedge accounting
About: Hedge accounting is a research topic. Over the lifetime, 1197 publications have been published within this topic receiving 28677 citations.
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TL;DR: In this article, the authors develop a positive theory of the hedging behavior of value-maximizing corporations, treating hedging by corporations simply as one part of the firm's financing decisions.
Abstract: We develop a positive theory of the hedging behavior of value-maximizing corporations. We treat hedging by corporations simply as one part of the firm's financing decisions. We examine (1) taxes, (2) contracting costs, and (3) the impact of hedging policy on the firm's investment decisions as explanations of the observed wide diversity of hedging practices among large, widely-held corporations. Our theory provides answers to the questions: (1) why some firms hedge and others do not; (2) why firms hedge some risks but not others; and (3) why some firms hedge their accounting risk exposure while others hedge their economic value.
3,218 citations
TL;DR: This article found that hedge funds follow strategies that are dramatically different from mutual funds, and support the claim that these strategies are highly dynamic, and found five dominant investment styles in hedge funds, which when added to Sharpe's asset class factor model can provide an integrated framework for style analysis of both buy-and-hold and dynamic trading strategies.
Abstract: This article presents some new results on an unexplored dataset on hedge fund performance. The results indicate that hedge funds follow strategies that are dramatically different from mutual funds, and support the claim that these strategies are highly dynamic. The article finds five dominant investment styles in hedge funds, which when added to Sharpe’s (1992) asset class factor model can provide an integrated framework for style analysis of both buy-and-hold and dynamic trading strategies.
1,385 citations
TL;DR: In this article, the authors used a large hand-collected dataset from 2001 to 2006 to find that hedge funds in the U.S. propose strategic, operational, and financial remedies and attain success or partial success in two thirds of the cases.
Abstract: Using a large hand-collected dataset from 2001 to 2006, we find that activist hedge funds in the U.S. propose strategic, operational, and financial remedies and attain success or partial success in two thirds of the cases. Hedge funds seldom seek control and in most cases are nonconfrontational. The abnormal return around the announcement of activism is approximately 7%, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. Our analysis provides important new evidence on the mechanisms and effects of informed shareholder monitoring.
1,134 citations
TL;DR: In this article, a large sample of hedge fund data from 1988-1995 was used to find that hedge funds consistently outperform mutual funds, but not standard market indices, and the impact of six data-conditioning biases was explored.
Abstract: Hedge funds display several interesting characteristics that may influence performance, including: flexible investment strategies, strong managerial incentives, substantial managerial investment, sophisticated investors, and limited government oversight. Using a large sample of hedge fund data from 1988-1995, we find that hedge funds consistently outperform mutual funds, but not standard market indices. Hedge funds, however, are more volatile than both mutual funds and market indices. Incentive fees explain some of the higher performance, but not the increased total risk. The impact of six data-conditioning biases is explored. We find evidence that positive and negative survival-related biases offset each other. HEDGE FUNDS HAVE BEEN IN EXISTENCE for almost 50 years. However, their recent growth has increased their prominence in the financial markets and the business press. Since the late 1980s, the number of hedge funds has risen by more than 25 percent per year. The rate of growth in hedge fund assets has been even more rapid. In 1997, there were more than 1200 hedge funds managing a total of more than $200 billion. Though the number and size of hedge funds are small relative to mutual funds, their growth reflects the importance of this alternative investment vehicle for institutional investors and wealthy individual investors.' As the name implies, hedge funds began as investment partnerships that could take long and short positions. They have evolved into a multifaceted organizational structure that defies simple definition. There are, however, a
1,131 citations
TL;DR: The authors proposed a model of hedge fund returns that is similar to models based on arbitrage pricing theory, with dynamic risk-factor coefficients for diversified hedge fund portfolios, which can explain up to 80 percent of monthly return variations.
Abstract: Following a review of the data and methodological difficulties in applying conventional models used for traditional asset class indexes to hedge funds, this article argues against the conventional approach Instead, in an extension of previous work on asset-based style (ABS) factors, the article proposes a model of hedge fund returns that is similar to models based on arbitrage pricing theory, with dynamic risk-factor coefficients For diversified hedge fund portfolios (as proxied by indexes of hedge funds and funds of hedge funds), the seven ABS factors can explain up to 80 percent of monthly return variations Because ABS factors are directly observable from market prices, this model provides a standardized framework for identifying differences among major hedge fund indexes that is free of the biases inherent in hedge fund databases
1,045 citations