Review of Accounting Studies

, Volume 22, Issue 3, pp 1084–1121 | Cite as

Do risk management practices work? Evidence from hedge funds

Article

Abstract

We examine hedge fund risk management practices and their association with left-tail risk during the 2008 financial crisis. Consistent with risk management practices reducing left-tail risk, funds in our sample that use formal risk models performed significantly better in the extreme down months of 2008. We find no evidence that having either position limits or a dedicated head of risk management is associated with reduced left-tail risk. Funds employing value at risk models had more accurate expectations of how they would perform in a short-term equity bear market.

Keywords

Risk management Hedge funds Financial crisis 

JEL Classification

G11 G23 M40 

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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.INSEADFontainebleauFrance
  2. 2.Tuck School of Business at Dartmouth CollegeHanoverUSA

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