Hedge Fund Returns: An Overview of Return-Based and Asset-Based Style Factors

The goal of modelling is to find one or more factors that offer the best explanatory power for a given variable.

Author(s) :

Walter Gehin

Research Associate, Edhec Risk and Asset Management Research CentreBusiness Analyst, Misys Asset Management Systems

Applied to hedge fund returns, it allows their sources to be better understood. In the search for significant factors, two approaches can be employed, namely return-based style factors (RBS factors) and asset-based-style factors (ABS factors). This paper proposes an overview of the extensive literature dedicated to RBS and ABS style factors by describing approaches that identify ABS factors in four strategies (Convertible Arbitrage, Equity Long/Short, Risk Arbitrage and Trend Following), examining studies that deduce ABS factors from RBS factors, and summarising a method for modelling the returns of a diversified portfolio of hedge funds.
Hedge Fund Returns: An Overview of Return-Based and Asset-Based Style Factors...
(-1.00 B)
Type : Position paper
Date : le 09/01/2006
Extra information : Ce document constitue une synthèse de travaux scientifiques conduits au sein de l'EDHEC. Pour plus d'informations, nous vous prions de vous adresser à Séverine Anjubault de la direction de la recherche de l'EDHEC : severine.anjubault@edhec.edu Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

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