EQIRA: Empirical and Quantitative Investment Research and Analysis

Hedge Funds Reduced Net Longs Before Recent Correction

This chart of the rolling 10-day beta of the HFRX Global Hedge Fund Index relative to the S&P 500 suggests that hedge funds were reducing their net long stock exposure in advance of the recent market correction. After briefly touching 0.46 in early July, the measure fell steadily to a low of 0.16 in mid-August. It currently stands at 0.22, above its long-run mean of 0.16, but less than half of its near-term high. With only a few days remaining until funds begin reporting August returns, it will be interesting to see the extent to which hedge funds were able to sidestep losses this month.

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