The Research Of Chinese Hedge Funds From Behavior Finance Prospect

Since 1990, with the further progress of economic globalization, the impact of hedge funds representing the international flow of capital with the global economy growing. Hedge funds as an extremely flexible new investment institutions, are welcomed by high net worth individuals and institutional investors. According HFR(Hedge Fund Research) Center statistics, the hedge fund industry is basically increased by 20% annual growth rate in the last twenty years.Based on the analysis of behavioral finance paradigm, this article research the profit source from different hedge fund investment strategies firstly. And from the perspective of empirical, research the effect of announcement of the private placement market, then on the basis of findings, proposed one hedge fund investment strategy which can operate. In terms of hedge funds risk management, first research the correlation of hedge funds and other asset categories, as well as the different sources of risk form investment strategy; Secondly explores the flaws and shortcomings of VaR method in the process of hedge fund risk management, based on these proposed solutions which can be used to management risk of hedge funds.The main conclusion of this article include these aspects. First with a high degree of recognition of behavioral finance concepts that hedge funds take advantage of the irrational characteristics of the market. Not only does it use the market "behavior paradigm" to get investment profits, but also effectively control its own cognitive biases in order to control systemic risks better and protect the interests of investors. Second, from a broader sense, the hedge fund itself as a kind of asset allocation, and the low correlation with other markets provides an effective risk management tool, reduce the overall market system risk. Third, from the perspective of behavioral finance to study the investment strategy and risk management of hedge funds, we can make a deeper understanding of risk-return characteristics of hedge funds.