Date of Award
12-2016
Document Type
Honors Thesis
Degree Name
Bachelor of Arts
Department
Finance
Advisor/Committee Chair
David M. Smith
Abstract
In this paper, the effect of leverage on hedge fund performance is measured. TASS data from 1994 to 2016 are used to measure the impact of leverage on hedge fund performance. Three hedge fund performance measurements are regressed on degree of leverage with eight control variables including fund size, strategies, and use of derivatives. The results show that for strategyadjusted return as a performance measurement, hedge fund leverage has a negative impact on fund performance. Also there is evidence of diseconomies of scale where funds with medium-sized assets under management (AUM) tend to show better performance than funds with high AUM. No significant relation between use of leverage and performance is observed for other performance measurements, including the Fung and Hsieh seven and eight-factor alpha and style-adjusted return.
Recommended Citation
Choi, Wansoo, "The Impact of Leverage on Hedge Fund Performance" (2016). Financial Analyst. 6.
https://scholarsarchive.library.albany.edu/honorscollege_finance/6