Hedge Funds Hurt By Volatility

Despite extremely poor returns, the growth of the hedge fund industry has been explosive. Assets under management grew from about $50 billion in 1990 to more than $2 trillion by 2007. Today that figure is at an estimated $3 trillion.

It’s believed hedge funds account for almost a third of the average daily stock market volume. Their rapid growth has brought not only controversy, but also increased scrutiny from regulators as well as legislators.

Jan Wrampelmeyer, assistant professor at the Swiss Institute of Banking and Finance at the University of St. Gallen in Switzerland, attempted to shed light on the relationship between hedge funds and markets with his study, “The Joint Dynamics of Hedge Fund Returns, Illiquidity, and Volatility.”

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