Three Essays on Political Risk, Economic Policy Uncertainty, and Hedge Fund Returns
type: CreativeWork
description: This thesis comprises three empirical essays on political risk, economic policy uncertainty, and hedge fund returns, employing a sample over a period of 1990-2017. The first essay investigates the relation between political risk and hedge fund returns and assesses whether the effects of political risk on hedge fund returns will vary across different hedge fund strategies. The second essay examines the relationship between economic policy uncertainty and hedge fund performance and tests whether the effects of economic policy uncertainty on performance will vary across hedge fund investment strategies. The final essay explores whether hedge fund managers can successfully time economic policy changes at both the aggregate and strategy levels. Using three analytical approaches, namely, univariate portfolio analysis, multivariate portfolio analysis through Fama and MacBeth (1973) regressions, and time series analysis, we document the following findings: In the first essay, we show that political risk exposure is an important determinant of hedge fund returns. After controlling for fund characteristics, we find a robust and significant negative risk premium for political risk exposure in the cross-section of hedge fund returns. We also discover that the effects of political risk on hedge fund performance do vary with different hedge fund strategies, where political risk is negative and significant for all strategies with the exception of managed futures, event driven, distressed securities, and fixed income strategies. This suggests that political risk can explain the variation in fund returns, thereby being a potential pricing factor in hedge fund performance. In the second essay, we find that economic policy uncertainty is a highly significant factor explaining the dispersion of cross-sectional hedge fund returns. After controlling for different sets of hedge fund characteristics, economic policy uncertainty remains negative and highly significant. Therefore, economic p…
abstract: This thesis comprises three empirical essays on political risk, economic policy uncertainty, and hedge fund returns, employing a sample over a period of 1990-2017. The first essay investigates the relation between political risk and hedge fund returns and assesses whether the effects of political risk on hedge fund returns will vary across different hedge fund strategies. The second essay examines the relationship between economic policy uncertainty and hedge fund performance and tests whether the effects of economic policy uncertainty on performance will vary across hedge fund investment strategies. The final essay explores whether hedge fund managers can successfully time economic policy changes at both the aggregate and strategy levels. Using three analytical approaches, namely, univariate portfolio analysis, multivariate portfolio analysis through Fama and MacBeth (1973) regressions, and time series analysis, we document the following findings: In the first essay, we show that political risk exposure is an important determinant of hedge fund returns. After controlling for fund characteristics, we find a robust and significant negative risk premium for political risk exposure in the cross-section of hedge fund returns. We also discover that the effects of political risk on hedge fund performance do vary with different hedge fund strategies, where political risk is negative and significant for all strategies with the exception of managed futures, event driven, distressed securities, and fixed income strategies. This suggests that political risk can explain the variation in fund returns, thereby being a potential pricing factor in hedge fund performance. In the second essay, we find that economic policy uncertainty is a highly significant factor explaining the dispersion of cross-sectional hedge fund returns. After controlling for different sets of hedge fund characteristics, economic policy uncertainty remains negative and highly significant. Therefore, economic p…
author: Rungmaitree, Pattamon
license: https://dora.dmu.ac.uk/bitstreams/f53bcfe1-6682-48f6-92fa-50384b50c534/download
date published: 2023-01
date modified: 2026-07-24T06:18:27Z
provider: De Montfort University
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: De Montfort University