Press release, 9 February 2012
Juha Joenväärä's doctoral thesis "Essays on hedge fund performance and risk" at the Oulu University has been awarded the first prize in OP-Pohjola Group's Research Foundation's Doctoral Thesis competition. The award is worth 10,000 euros.
In his thesis, Juha Joenväärä studies novel methodologies, based on economic theory and econometrics, of measuring and predicting hedge fund performance and risks. The research results show that regulators and investors would clearly benefit from the implementation of these methods.
The study examines how systemic risks can be measured using a new risk indicator. By means of this indicator, regulators can identify hedge funds which may threaten the stability of the financial system. According to the results, regulators should above all concentrate on factors related to the capital structure, counterparty risk and liquidity of funds, and not so much on leverage, although the media and politicians have focused on them.
By using the new risk indicator, it is possible to choose hedge funds for investment that are likely to offer diversification benefits in situations where it is sorely needed, i.e. during periods of extreme negative market movements. Judging by the research results, investment strategies based on liquid futures, in particular, create considerable diversification benefits.
The thesis also shows that the performance of hedge funds can be particularly well predicted by using indicators based on both the main characteristics of the funds, such as fee structures and redemption terms, and on analysis of economic cycles.
The Faculty of Economics and Business Administration of the University of Oulu approved the thesis on 20 October 2010 with the grade "excellent".
Based on their own qualifier process, universities entered five doctoral dissertations for the Research Foundation's competition organised for the tenth time in a row. The Board of OP-Pohjola Group Research Foundation selects the winner.
For more information, please contact: Matti Huomo, representative of the Research Foundation, tel. 010 252 2232, matti.huomo @ op.fi
OP-Pohjola Group is Finland's leading financial services group providing a unique range of banking, investment and insurance services. The Group has the mission of promoting the sustainable prosperity, well-being and security of its owner-members, customers and operating regions through its local presence. Its objective is to offer the best and most versatile package of loyal customer benefits on the market. OP-Pohjola Group consists of some 200 member cooperative banks and the Group's central institution, OP-Pohjola Group Central Cooperative, with its subsidiaries and closely-related companies, the largest of which is the listed company Pohjola Bank plc. With a staff of more than 13,000 OP-Pohjola Group posted consolidated earnings of 518 million euros before tax in 2011 and had total assets of 92 billion euros on 31 December 2011. The group has over four million customers.
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Source: Pohjola Pankki Oyj via Thomson Reuters ONE