The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Careers and Survival: Competition and Risk in the Hedge Fund and CTA Industry
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00392
Stephen J. Brown, William N. Goetzmann, James Park
Investors in hedge funds and commodity trading advisors (CTAs) are concerned with risk as well as return. We investigate the volatility of hedge funds and CTAs in light of managerial career concerns. We find an association between past performance and risk levels consistent with previous findings for mutual fund managers. Variance shifts depend upon relative rather than absolute fund performance. The importance of relative rankings points to the importance of reputation costs in the investment industry. Our analysis of factors contributing to fund disappearance shows that survival depends on absolute and relative performance, excess volatility, and on fund age.