By Greg N. Gregoriou
No matter if already skilled with hedge money or simply puzzling over making an investment in them, readers desire a company realizing of this designated funding motor vehicle that allows you to in attaining greatest good fortune. Hedge Funds unites over thirty of the head practitioners and teachers within the hedge fund to supply readers with the most recent findings during this box. Their research bargains with numerous themes, from new equipment of functionality assessment to portfolio allocation and risk/return concerns. even supposing many of the info is technical in nature, an realizing and applicability of the implications in addition to theoretical advancements are under pressure. packed with in-depth perception and specialist recommendation, Hedge Funds is helping readers utilize this versatile funding car.
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Additional info for Hedge funds : insights in performance measurement, risk analysis, and portfolio allocation
Sample text
Normality is rejected for three out of five hedge fund strategies, but not for stocks or bonds. Because investors have preferences over higher moments of the returns distribution, it is crucial to assess how an asset contributes to the different moments of the portfolio’s return distribution. We calculate betas for all four moments. 14 *Statistically significant at the 5 percent level. qxd 6/23/05 3:07 PM 30 Page 30 PORTFOLIO ALLOCATION IN HEDGE FUNDS is added. This corresponds to the standard Capital Asset Pricing Model (CAPM) beta commonly used in investment analysis.
Likewise, standard performance measures used to describe hedge fund returns essentially rely on the mean and the volatility. This poses a problem, since asset returns are not fully described by their mean and volatility (the first two moments of the return distribution). It is only under the restrictive assumption of normally distributed returns that the first two moments are sufficient to describe the distribution completely. For a normal distribution, the skewness (the third standardized moment, a measure of asymmetry) is 0 and the kurtosis (the fourth standardized moment, a measure of tail thickness) is 3.
The yield of Treasury bills affects a number of strategies, since these can benefit from an increase in shortterm interest rates with their short positions. A number of strategies benefit from flattening of the yield curve, or high bond market returns. Low levels of bond returns volatility usually affect CTA/global macro managers negatively. The returns of CTA/global macro also depend on prices in commodity markets. 22 Small Cap vs. 28 Historical Volatility of Bond Returns represent correlation coefficients.