interest rates, interest rate, looking at interest rates
interest rates on
required residential mortgage
loan escrow accounts

YEAR
INTEREST ON
ESCROW RATE
1994 2.93%
1995 2.81%
1996 2.91%
1997 2.83%
1998 2.83%
1999 2.74%
2000 2.51%
2001 2.53%
2002 2.09%
2003 1.39%
2004 0.81%
2005 0.72%
- posted by Mark Pane @ 5:46 PM 0 comments

 
hedge fund, what is a hedge fund, start a hedge fund, hedge fund research
Myth #5: Hedge Funds Are a Source of Systemic Risk There are two ways hedge funds could
increase systemic risk: First, they could reinforce asset bubbles, thus increasing the size of the losses and the damage to the financial system when the bubble
bursts. Two pieces of evidence contradict this. First, as negative-volatility traders, hedge fund managers make their
money by betting against unsustainable movements in security prices. Hence, not only do hedge funds not reinforce asset bubbles, they may in fact prevent
them in the first place. Second, a recent study by William Fung and David Hsieh finds that hedge fund returns are largely uncorrelated with those of mutual funds
and other asset classes—a finding that is also inconsistent with this definition of systemic risk.11 A second way that hedge funds could
increase systemic risk is by increasing the risk exposure of counterparties, especially in the derivatives market. In this scenario, a hedge fund’s failure could
impose losses on its counterparties large enough to seriously impair their capital, or even cause them to fail. This is the
“domino effect” variety of systemic risk. However, counterparty risk might also be posed by other investments. Furthermore, the transmission of a loss sizeable
enough to impair an institution’s capital is the result of poor credit policy and control by that institution. Thus, the risk
posed by hedge funds might be dealt with through improved regulation of counterparties. In fact, regulatory
authorities have identified several areas where improvement might be warranted.
- posted by Mark Pane @ 11:55 AM 0 comments

 
hedge fund, what is a hedge fund, start a hedge fund, hedge fund research
Myth #4: Hedge Funds Increase

Market Volatility

For hedge funds to increase volatility, their trading behavior would have to accentuate market swings through
positive-feedback trading behavior. That is, they would have to sell when prices are falling and buy when prices are rising. So far, studies have found no evidence of positive-feedback trading by hedge funds. In fact, they suggest that hedge funds engage in negative-feedback trading. That is, they tend to sell or take a short position when prices are rising
and buy when prices are falling. By providing ready counterparties to trades, hedge funds increase the liquidity of
markets and reduce price pressures in a falling or rising market. By doing so, the funds’ trading behavior tends to reduce, not increase, the volatility of prices.10
- posted by Mark Pane @ 10:52 AM 0 comments

 
hedge fund, what is a hedge fund, start a hedge fund, hedge fund research
Myth #3: Hedge Funds Are Responsible for the Currency Crises of the 1990s
Careful analysis of the 1992 Exchange Rate Mechanism crisis, the 1994–95
Mexican peso crisis, and the 1997 Asian currency crisis points to an array of factors
contributing to the devaluations. Even when hedge fund activities were a link in the chain of events leading to a
crisis, there is no evidence that the hedge funds caused the crises or collapses. It is
possible, for example, that hedge funds reacted to news of changes in macroeconomic policies. Moreover, at least in the Mexican and Asian crises, domestic
investors, rather than foreign hedge fund operators, played the lead role in dumping the currency.
- posted by Mark Pane @ 6:50 AM 0 comments