Holler Hedge Funds and Financial Markets

An Asset Management and Corporate Governance Perspective
2012
ISBN: 978-3-8349-3616-5
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 434 Seiten, eBook

Reihe: Geld - Banken - Börsen

Julian Holler was a research assistant at the Center for Banking and Finance at the University Giessen (Prof. Dr. Wolfgang Bessler). He works as a consultant focusing on energy and commodity markets in Frankfurt a.M.

Zielgruppe

Research

Autoren/Hrsg.

Holler, Julian

Inhaltsverzeichnis

1;Foreword;6
2;Preface;8
3;Short Contents;9
4;Contents;10
5;List of Figures;18
6;List of Tables;20
7;Abbreviations;22
8;Introduction;25
9;Part I. Hedge Funds from an Asset Management Perspective;32
9.1;Chapter I. Hedge Funds and their Trading Strategies;34
9.1.1;A. The Legal and Contractual Structure of Hedge Funds;34
9.1.1.1;I. Regulation and Legal Structure;34
9.1.1.2;II. Incentive Structure;35
9.1.1.3;III. Lock-Up Arrangements;37
9.1.1.4;IV. Prime Brokerage;38
9.1.2;B. The Trading Strategies of Hedge Funds;39
9.1.2.1;I. Directional strategies;39
9.1.2.2;II. Relative Value Strategies;42
9.1.2.3;III. Event-Driven Strategies;45
9.1.3;C. Summary;47
9.2;Chapter II. The Portfolio Benefits of Hedge Funds as an Alternative Asset Class;48
9.2.1;A. The Statistical Properties of Hedge Fund Returns;49
9.2.1.1;I. The Distribution of Hedge Fund Returns;49
9.2.1.2;II. Biases in Hedge Fund Data;52
9.2.2;B. Methods for Analyzing Hedge Funds’ Performance;55
9.2.2.1;I. Investor Preferences for Higher Order Moments;56
9.2.2.2;II. Multi-Factor Models;59
9.2.2.3;III. Performance Measurement Ratios;64
9.2.2.4;IV. Measurement of Performance Persistence;67
9.2.3;C. Risk-Adjusted Performance of Hedge Funds;69
9.2.3.1;I. Investment Skills of Hedge Fund Managers compared to Mutual Fund Managers;69
9.2.3.2;II. Determinants of the Cross-Section of Hedge Funds Performance;73
9.2.3.3;III. Summary;79
9.2.4;D. Diversification, Correlation Risk and Exposures to Alternative Risk Factors;80
9.2.4.1;I. Analysis for Individual Strategies;80
9.2.4.2;II. Analysis for the Aggregate Hedge Fund Universe;84
9.2.4.3;III. Summary and Conclusion;86
9.2.5;E. Summary and Conclusion;87
9.3;Chapter III. Hedge Funds and other Alternative Investments in Portfolio Choice;89
9.3.1;A. Alternative Methods for Portfolio Construction;90
9.3.1.1;I. Mean Variance Analysis;91
9.3.1.2;II. Higher-Moment Asset Allocation Models;94
9.3.2;B. Optimal Allocations to Hedge Funds and other Alternative Investments;97
9.3.2.1;I. Optimal Allocations to Hedge Funds based on Mean-Variance Analysis;97
9.3.2.2;II. Optimal Allocations to Hedge Funds and Higher Order Moments;99
9.3.2.3;III. Comparison of Optimal Allocations with other Alternative Investments;101
9.3.2.4;IV. Summary and Conclusion;102
9.3.3;C. Strategic Asset Allocations for Long-Term Investors and Hedge Funds;104
9.3.3.1;I. Strategic vs. Tactical Asset Allocation;105
9.3.3.2;II. Strategic Allocations of Hedge Funds;106
9.3.3.3;III. Tactical Asset Allocation with Hedge Funds;108
9.3.3.4;IV. Summary and Conclusion;110
9.3.4;D. Hedge Fund Investments from the Perspective of Different Investor Types;110
9.3.4.1;I. Suitability for different Types of Institutional Investors;110
9.3.4.2;II. Suitability for Retail Investors;117
9.3.5;E. Conclusion;118
9.4;Chapter IV. Hedge Funds in Different Financial Market Environments;119
9.4.1;A. Methodology;121
9.4.1.1;I. Bayesian Asset Allocation Framework;121
9.4.1.2;II. Mean-Variance Spanning Tests;122
9.4.2;B. Data;123
9.4.2.1;I. Asset Classes;123
9.4.2.2;II. Definition of Different Market Environments;126
9.4.3;C. Optimal Allocation in Hedge Funds – Full Period;127
9.4.3.1;I. Risk and Return over the Full Sample Period;128
9.4.3.2;II. Efficient Frontiers and Optimal Asset Allocations;130
9.4.3.3;III. Spanning Tests;131
9.4.4;D. Hedge Fund Investments in Different Market Environments;133
9.4.4.1;I. Risk and Return over Time Time-Varying Investment Opportunities;133
9.4.4.2;II. Efficient Frontiers and Optimal Allocations in Upand Down-Markets;137
9.4.4.3;III. Spanning Tests for different Market Environments;142
9.4.4.4;IV. Summary;144
9.4.5;E. Conclusion;146
10;Part II. The Impact of Hedge Funds on Corporate Governance System;147
10.1;Chapter I. Hedge Fund Activism and Corporate Governance;148
10.1.1;A. An Overview of Corporate Governance Mechanisms;148
10.1.2;B. Hedge Fund Approach to Corporate Control;150
10.1.2.1;I. Comparative Advantages in Activism and Monitoring;151
10.1.2.2;II. Hedge Fund Approach to exert Control;153
10.1.3;C. Monitoring of Managerial Moral Hazard;155
10.1.3.1;I. Adjustments of Firm-level Corporate Governance;156
10.1.3.2;II. Financial Restructurings;157
10.1.3.3;III. Corporate Restructurings;163
10.1.3.4;IV. Conclusion;173
10.1.4;D. Wealth Transfers and Conflicts of Interests with other Stakeholders;174
10.1.4.1;I. Risk Shifting and Wealth Transfers from Debtholders;175
10.1.4.2;II. Myopia and Wealth Transfers from Long-Term Shareholders;178
10.1.5;E. Empirical Evidence;180
10.1.6;F. Conclusion;182
10.2;Chapter II. Corporate Governance Systems and the Influence of Hedge Funds;184
10.2.1;A. The Traditional German Insider-based Corporate Governance System;184
10.2.1.1;I. The Old Governing Coalition in the German Corporate Governance System;185
10.2.1.2;II. Limited Influence of Capital Markets on German Corporate Governance;189
10.2.1.3;III. Conclusion;191
10.2.2;B. Activist Hedge Funds in the German Corporate Governance System;192
10.2.2.1;I. Reforms of the German Corporate Governance and the Emergence of Hedge Funds Activism;193
10.2.2.2;II. Ability of Hedge Funds to Restructure German Firms;197
10.2.2.3;III. Agency Problems between Hedge Funds and other Shareholders;201
10.2.2.4;IV. Empirical Evidence;202
10.2.3;C. Summary and Conclusion;204
11;Part III. Empirical Analysis – The Impact of Hedge Funds on German Target Firms;205
11.1;Chapter I. Data Description and Methodology;207
11.1.1;A. Sample Selection Approach;207
11.1.2;B. Decription of Dataset of Hedge Fund Engagements;209
11.1.2.1;I. Distribution of Events over Time, Industries and Market Segments;209
11.1.2.2;II. Hedge Funds’ Trading Approaches and Behavior vis-à-vis Target Firms;214
11.1.3;C. Methodology;217
11.1.3.1;I. Measuring Short-term Valuation Effects;218
11.1.3.2;II. Measuring Long-term Abnormal Performance;224
11.1.3.3;III. Operating Performance;230
11.2;Chapter II. Hedge Fund Activism in Good Times;232
11.2.1;A. Characteristics of Target Companies;232
11.2.1.1;I. Financial Policies, Profitability and Diversification;233
11.2.1.2;II. Market Valuation of Target Companies;237
11.2.1.3;III. Ownership Structure of Target Firms;245
11.2.2;B. Short-term Valuation Effects;247
11.2.2.1;I. Results for the Full Sample;248
11.2.2.2;II. Results for Subsamples;253
11.2.2.3;III. Cross-Sectional Regressions;265
11.2.3;A. Long-Run Performance;269
11.2.3.1;I. Buy-and-Hold Abnormal Returns;270
11.2.3.2;II. Calendar-time Portfolio Approach;289
11.2.3.3;III. Robustness Check Generalized Calendar Time Portfolio Approach;301
11.2.4;B. Summary and Conclusion;312
11.3;Chapter III. Hedge Fund Investments in the Down-Market;314
11.3.1;A. Hedge Fund Investments during the Recent Financial Crisis;316
11.3.2;B. Characteristics of Target Companies during the Down-Market;318
11.3.2.1;I. Financial Policies, Profitability and Diversification;319
11.3.2.2;II. Market Valuation of Target Companies;323
11.3.2.3;III. Ownership Structure of Target Firms;331
11.3.3;C. Valuation Effects in the Down-Market;334
11.3.3.1;I. Valuation Effects in the Down-Market – Full Period;334
11.3.3.2;II. Valuation Effects at different Stages of the Subprime Crisis;340
11.3.3.3;III. Subsamples based on event characteristics;341
11.3.3.4;IV. Cross-Sectional Regressions;349
11.3.3.5;V. Calendar Time Approach;353
11.3.3.6;VI. Robustness Check Generalized Calendar Time Approach;363
11.3.4;D. Conclusion;370
11.4;Chapter IV. Robustness Checks;371
11.4.1;A. Operating Performance;371
11.4.1.1;I. Good Times;372
11.4.1.2;II. Bad Times;378
11.4.2;B. Liquidity of Target Stocks;382
11.4.2.1;I. Good Times;382
11.4.2.2;II. Bad Times;384
11.4.2.3;III. Summary;387
12;Part IV. Conclusion and Outlook;388
13;Bibliography;393

Hedge Funds as an Individual Investment and from a Portfolio Perspective. - Hedge Fund Activism and Corporate Governance in Germany. - Empirical Analysis: Optimal Asset Allocation with Hedge Funds and the Valuation Effects of Hedge Fund Activism in Germany.

Über Autor(innen)

Julian Holler was a research assistant at the Center for Banking and Finance at the University Giessen (Prof. Dr. Wolfgang Bessler). He works as a consultant focusing on energy and commodity markets in Frankfurt a.M.