Exploring the Implications of Hedge Funds in the Market

Abstract

The purpose of this study is to investigate the behavior of hedge funds in the global financial market during both bear and bull markets since 2000. Specifically, I analyzed hedge fund returns and measured correlation coefficients during the bear markets of 2000-2002 and 2008-2009, and the bull markets of 2003-2007 and 2009-2014. I used the Hedge Fund Research Database to collect hedge fund data for specific strategies and used the S&P 500 Index and the MSCI World Index as a proxy for the domestic and global market, respectively. The results indicate that hedge fund behavior has shifted over the last 15 years, and a focus on specific hedge fund strategy has become increasingly important to investors.