Moments Analysis in Risk and Performance Measurement

Stochastic dominance analysis of Asian hedge funds

“…It is a useful tool for ranking self appraised and peer group appraised hedge funds. Lee et al (2006) introduced a practical non-linear approach based on first and cross-moments analyses in up and down markets to assess the risk and performance of Asian hedge funds. They found that while all funds provide diversification in the sense that they are not perfectly correlated with market index returns, few funds provide downside protection along with upside capture that is assumed to be preferred by investors.…”

“…Recently, using the same dataset, Lee et al (2006) found that some of the Asian hedge funds provide upside capture, downside protection, low volatility in down markets and high volatility in up-markets. Our findings, when comparing the CDF of AHF01 with that of AHF18 or AHF39, first support the findings of Lee et al that AHF01 possesses lower volatility in down markets (and thus provides downside protection) 16 and possesses high volatility in up-markets (and thus provides upside capture) 17 .…”

Tail Event Driven ASset allocation: evidence from equity and mutual funds’ markets

“…According to Lee et al [2006], the inclusion of assets with returns that are skewed and leptokurtic in the portfolio will enhance returns. These assets provide the opportunity of downside protection especially during periods of high volatility.…”