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.

Author(s) :

Antonio Diez de los Rios

Rene Garcia

EDHEC Business School

This paper provides a statistical methodology to unveil such non-linear features with the returns on any selected benchmark index. We estimate a portfolio of options that best approximates the returns of a given hedge fund, account for this search in the statistical testing of the contingent claim features, and test whether the identifed non-linear features have a positive value. We find that not all indexes for categories of funds exhibit significant non-linearities, and that only a few strategies as a group provide significant value to investors. Our methodology helps identify individual funds that provide value in an otherwise poorly performing category.
Pdf
Assessing and Valuing the Non-Linear Structure of Hedge Fund Returns...
(-1.00 B)
Type : Working paper
Date : le 05/11/2007
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [ joanne.finlay@edhec.edu] Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

EDHEC Business School hosts the Family Business Extension  of the 38th Strategic Management Society (SMS) Annual Conference
News
- 18-05-2018
  Like in previous years, the 2018 Family Business Extension will bring together a...
Award
News
- 17-05-2018
Photo: Award-winning Messaoud Chibane, PhD (2016) and Alain Papiasse, BNP Paribas...
30 years of impact for EDHEC : A ceremony in honour of Olivier Oger
News
- 17-05-2018
Staff, professors, Alumni, historical partners: they have all met on the Nice and Lille...
PUBLICATION
News
- 16-05-2018
Jeroen Jansen’s article “Local Volatility and the Recovery Rate of Credit Default Swaps...