Speaker： WANG Songtao Associate Professor, Shanghai Jiao Tong University

Date:  12:00-13:00, 19th October 2021

Venue: Room 306, Tongji Building A

Abstract: 

In this paper, we first examine the effect of the risk associated with innovations in economic policy uncertainty (EPU), that is, EPU risk, on hedge fund returns in the cross section. We find that the average return on funds with high exposure to EPU risk is 0.49% per month lower than that on funds with low exposure. Conventional risk factors cannot explain the negative relation between EPU risk and future hedge fund returns. Then, we explore hedge funds’ EPU timing ability, and find that 12.5% of the funds in our sample have such an ability. An investment strategy long in top-ranked EPU timing funds and short in bottom-ranked EPU timing funds delivers a significantly positive risk-adjusted return of 4.07% per year.