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Session Ⅰ- 제5분과:연기금 1

Option-Implied Tail Risk, Timing by Hedge Funds, and Performance

초록

영어

This paper newly focuses on an unexplored dimension of fund managers’ timing ability; marketwide tail risk implied by information in option market. We investigate whether hedge fund managers can strategically time market tail risk implied by option through adjusting their portfolios’ market exposure to changes of market tail risk. Using an extensive sample of 6147 equity-oriented hedge funds from 1996 to 2012, we find strong evidence of tail risk timing ability of hedge fund managers. We conduct bootstrap analysis and confirm that our tail risk timing ability is not attributed to pure luck. Furthermore, tail risk timing ability brings a significant economic value to investors. Specifically, in out-of-sample tests, top-ranked hedge funds outperform bottom-ranked funds by 5-7% annually after adjusting common risk factors. Also, we find that managers’ tail risk timing skill persists over time, suggesting that hedge fund managers’ tail risk timing ability reflects true managerial skill. Our overall results are robust to various hedge fund characteristics, subsample or sub-period analysis, the use of alternative timing abilities, and other hedge funds’ managerial skills. All the empirical examination emphasizes the role of market-wide option-implied tail risk in hedge fund managers’ skill and their performance.

목차

ABSTRACT
 1. Introduction
 2. Option-Implied Tail Risk Timing Model
  2 – 1 Tail Risk Timing Model
  2 – 2 Measure of Option-Implied Tail Risk
 3. The Hedge Fund Data
  3 – 1 Hedge Fund Sample
  3 – 2 Risk Factors
 4. Empirical Results
  4-1 Cross-Sectional Distribution of t-Statistics for Tail Risk Timing
  4-2 Bootstrap Analysis
  4-3 Economic Value of Tail Risk Timing
  4-4 Persistence of tail risk timing
 5. Additional Results and Robustness
  5-1 Subsample Analysis
  5-2 Sub-Period Analysis
  5-3 Controlling for Other Timing Skills
  5-4 Controlling for Other Managerial Skills
 6. Conclusions
 References

저자정보

  • Min Ki Kim KAIST College of Business
  • Dong Jun Oh Mirae Asset Global Investments Co. Ltd.
  • Jung Soon Shin Ewha Womans University
  • Tong Suk Kim KAIST College of Business

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