Conditional Properties of Hedge Funds: Evidence from Daily Returns

Crop price comovements during extreme market downturns

“…Financial economists have long recognised that univariate distributions of financial returns depart from normality (Blanchard and Watson 1982). Recent evidence finds similar results in multivariate distributions of stock prices (Lux and Sornette 2002), hedge fund returns (Li and Kazemi 2007;Boyson et al 2010) and housing prices (Zimmer 2015). Rodriguez (2007), using procedures similar to those employed in this paper, confirms departures from normality are especially prevalent in the midst of financial turmoil.…”

The performance of hedge funds and mutual funds in emerging markets

“…For the same reason, Liang and Park (2007) start their analysis in 1995. The unreliability of data before 1994 is also discussed by Fung and Hsieh (2000), Liang (2000), and Li and Kazemi (2007). 8 See, e.g., Amenc et al (2003), Baquero et al (2005), and Brown et al (1999).…”

Passive Hedge Fund Replication – Beyond the Linear Case

“…Because these non‐linear dependencies often arise from the presence of dynamic trading strategies inherent to hedge fund manager performance and risk management processes, we also consider various conditional factor models as alternatives to the non‐linear model in our attempt to improve upon the performance of the linear unconditional model in Hasanhodzic and Lo (2007). More specifically, we test the performance of a Markov‐regime switching approach as well as a Kalman filtering approach, both of which allow us to capture state‐dependencies in the relationship between hedge fund returns and underlying risk factors (see Li and Kazemi (2007)) for an analysis of conditional properties of hedge fund return distributions). In the end, given the profound correspondence between dynamic trading strategies and non‐linear payoffs (cf.…”