What were the causes behind the unprecedented losses suffered by quantitative hedge funds during first week of August 2007?
What were the causes behind the unprecedented losses suffered by quantitative hedge funds during first week of August 2007?
The Program for Financial Studies
Investment professionals were stunned when quantitative hedge funds suffered unprecedented losses for no obvious reason during the first week of August 2007. Hypotheses in academic journals and the popular press later sought to explain the causes of the declines, such as whether a new quant fund risk factor had been created by the funds unknowingly sharing large positions. In this case students examine the events surrounding the meltdown, consider the hypotheses, and analyze quant fund returns, while also considering whether new approaches are needed to deal with previously unknown risks.