Performance of Passive Hedge Fund Replication Strategies

In this paper we extend Hasanhodzic and Lo (2007) by assessing the out-of-sample performance of various non-linear and conditional hedge fund replication models.

Author(s):

Noel Amenc

Professor of Finance and Director of the EDHEC Risk and Asset Management Research Centre

Lionel Martellini

Professor of Finance, EDHEC Business SchoolScientific Director, EDHEC Risk and Asset Management Research Centre

Jean-Christophe Meyfredi

Professor of Finance, EDHEC Business School

Volker Ziemann

Research Engineer at the EDHEC Risk and Asset Management Research Centre

We find that going beyond the linear case does not necessarily enhance the replication power. On the other hand, we find that selecting factors on the basis of an economic analysis can lead to a substantial improvement in out-of-sample replication quality, whatever the underlying form of the factor model. Overall, we confirm the findings in Hasanhodzic and Lo (2007) the performance of the replicating strategies is systematically inferior to that of the actual hedge funds.
Pdf
Performance of Passive Hedge Fund Replication Strategies...
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Type: Working paper
Date: le 16/09/2009
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 des auteurs et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

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