Sadka (2009)shows that exposure to unexpected declines in ________ is an important determinant of average hedge fund returns and that the spreads in average returns across funds with the highest and lowest ________ may be as much as 6% annually.

Question

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Sadka (2009) shows that exposure to unexpected declines in market liquidity is an important determinant of average hedge fund returns and that the spreads in average returns across funds with the highest and lowest liquidity risk may be as much as 6% annually. Therefore, the correct answer is B, as it accurately reflects the findings of the study. Choice A is incorrect, as market risk is not specifically mentioned in the study. Choice C is also incorrect, as unsystematic risk or unique risk is not discussed in relation to hedge fund returns. Choice D is unrelated to the study's findings. Finally, option E is also incorrect, as while market risk is mentioned in the study, it is not linked to default risk as an important determinant of hedge fund returns.

Sadka (2009)shows That Exposure to Unexpected Declines in ________ Is