HEDGE FUND SURVIVAL: NON‐NORMAL RETURNS, CAPITAL OUTFLOWS, AND LIQUIDITY

Abstract

Abstract We analyze the factors that influence the survival probability of hedge funds reported in the Lipper TASS database. Particular emphasis is placed on (1) non‐normality of returns and assets under management (AUM), (2) short‐term capital outflows, and (3) liquidity constraints associated with a hedge fund's cancellation policy. Estimation results using the Cox proportional hazards model and the panel logit model show that (1) funds with lower skewness in returns and AUM, (2) funds experiencing instantaneous rapid capital outflows, and (3) funds with a shorter redemption notice period and a higher redemption frequency have significantly higher liquidation probabilities, among others.