Estimating Operational Risk for Hedge Funds The ω-Score

@inproceedings{Brown2008EstimatingOR,
  title={Estimating Operational Risk for Hedge Funds The ω-Score},
  author={Stephen Douglas Brown and William Goetzmann and Bing Liang and Christopher Schwarz},
  year={2008}
}
Using a complete set of the SEC filing information on hedge funds (Form ADV) and the TASS data, we develop a quantitative model called the ω-Score to measure hedge fund operational risk. The ω-Score is related to conflict of interest issues, concentrated ownership, and reduced leverage in the ADV data. With a statistical methodology, we further relate the ω-Score to readily available information such as fund performance, volatility, size, age, and fee structures. Finally, we demonstrate that… CONTINUE READING
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