Is There Hedge Fund Contagion?

The authors examine whether hedge funds experience contagion. To conduct this examination, the authors estimate binomial and multinomial logit models of contagion using daily returns on hedge fund style indices as well as monthly returns on indices with a longer history. The main finding is that there is no evidence of contagion from equity, fixed income, and foreign exchange markets to hedge funds, except for weak evidence of contagion for one single daily hedge fund style index.