Juan Yao Seminar
- Topic: Evaluating and Predicting the Failure Probabilities of Hedge Funds
Juan Yao, Lecturer in Finance, The University of Sydney Business School
- Venue:E4A 623
- When: 9th May, 2014, (Fri)
- Time: 11am - 12pm (Morning Tea from 10.30am)
Hedge funds have the most sophisticated risk management practices; however, hedge funds also appear to have a short lifetime relative to other managed funds. In this study, we investigate the failure probabilities of hedge funds—particularly the failures due to financial distress. We forecast the failure probabilities of hedge funds using both a proportional hazard model and a logistic model. By utilizing a signal detection model and a relative operating characteristic curve as the prediction accuracy metrics, we found that both of the models have predictive power in the out-of-sample test. The proportional hazard model, in particular, has stronger predictive power, on average.