After the post-2008 global financial crisis, people are much more interested in knowing more about human capital as a key indicator of future value in firms. Investors increasingly need to see early warning signs of failure or growth prospects in their investments. For bankers, lending proposals are either accepted or rejected on the basis of set financial ratios, such as debt to equity and loan to valuation.

Do these ratios tell the real story of the value which is being created, or destroyed, within a company? Is it dangerous for investors to rely on quantitative measures alone?

Investor reaction to mutual fund performance conditions the behavior of mutual fund managers and fund complexes and thus has widely reaching ramifications for the trading of assets worldwide.

This report provides the guidelines necessary for standardising the measurement of risk so that it can be applied to make meaningful comparisons between one fund and another.

In this paper, using a large database of hedge fund returns, we examine the risk taking behaviour of hedge fund managers in response to both their past returns relative to their high-water mark and their past returns relative to their peer group.