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This paper analyzes the geographical preferences of hedge fund investors and the implication of these preferences for hedge fund performance. We find that funds of hedge funds overweight their investments in hedge funds located in the same geographical areas and that funds of funds with a stronger local bias exhibit superior performance. However, this local bias of funds of funds adversely impacts the hedge funds by creating excess comovement and local contagion. Overall, our results suggest that while local funds of funds benefit from local performance advantages, their local bias creates market segmentation that could destabilize financial markets.

Zonder onderwerpscode: economie

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This paper analyzes the geographical preferences of hedge fund investors and the implication of these preferences for hedge fund performance. We find that funds of hedge funds overweight their investments in hedge funds located in the same geographical areas and that funds of funds with a stronger local bias exhibit superior performance. However, this local bias of funds of funds adversely impacts the hedge funds by creating excess comovement and local contagion. Overall, our results suggest that while local funds of funds benefit from local performance advantages, their local bias creates market segmentation that could destabilize financial markets.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This eBook is a collection of articles from a Frontiers Research Topic. Frontiers Research Topics are very popular trademarks of the Frontiers Journals Series: they are collections of at least ten articles, all centered on a particular subject. With their unique mix of varied contributions from Original Research to Review Articles, Frontiers Research Topics unify the most influential researchers, the latest key findings and historical advances in a hot research area! Find out more on how to host your own Frontiers Research Topic or contribute to one as an author by contacting the Frontiers Editorial Office: frontiersin.org/about/contact

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