Research and publications
Assessing and Valuing the Non-Linear Structure of Hedge Fund Returns
Several studies have put forward that hedge fund returns exhibit a non-linear relationship with equity market returns, captured either through constructed portfolios of traded options or piece-wise linear regressions. This paper provides a statistical methodology to unveil such non-linear features with the returns on any selected benchmark index. It estimate a portfolio of options that best approximates the returns of a given hedge fund, accounts for this search in the statistical testing of the contingent claim features, and tests whether the identifed non-linear features have a positive value. A revisited version of this paper was published in the March 2011 issue of the Journal of Applied Econometrics.
Author(s):
Antonio Diez de los Rios, René Garcia
Summary:
Several studies have put forward that hedge fund returns exhibit a non-linear relationship with equity market returns, captured either through constructed portfolios of traded options or piece-wise linear regressions. This paper provides a statistical methodology to unveil such non-linear features with the returns on any selected benchmark index. It estimate a portfolio of options that best approximates the returns of a given hedge fund, accounts for this search in the statistical testing of the contingent claim features, and tests whether the identifed non-linear features have a positive value. A revisited version of this paper was published in the March 2011 issue of the Journal of Applied Econometrics.
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Register/Log in| Type : | Working paper |
|---|---|
| Date : | 11/05/2007 |
| Keywords : |
Alternative Investments |
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