The Fund of Hedge Fund Selection Puzzle: A Pragmatic Approach to Identify the X-Factor
Serge Darolles, Mathieu Vaissié: We use the regime switching approach introduced in Pelletier (2006), and adapted by Giamouridis and Vrontos (2007) to the context of hedge fund portfolios, to design a new tactical style allocation factor.
Auteur(s) :
DRM-Université Paris Dauphine
Head of Research, Ginjer AMResearch Associate, EDHEC-Risk Institute
Présentation :
We then propose to leverage on this factor to identify fund of hedge fund managers who turn out to be good at capturing the upside while controlling for the downside risk. By so doing, we provide investors with a pragmatic though robust approach to address the fund of hedge fund selection puzzle. We show in the empirical analysis that funds of hedge funds showing the strongest loading on our factor outperform their peers materially. Very interestingly, we find persistence for both the highest and the lowest loadings. In the end, 11% of the funds of hedge funds in our sample systematically appear in the 1st tier.| Type : | Working paper |
|---|---|
| Date : | le 14/04/2014 |
| Complément d'informations | For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ] |
| Pôle de recherche | Finance |
A voir également
A propos de l'EDHEC
Implantée à Lille, Nice, Paris, Londres et Singapour, l'EDHEC est l'une des 20 meilleures écoles de commerce du monde. Résolument internationale et directement connectée au monde des affaires, elle est reconnue pour l'excellence de sa recherche et sa capacité à former des entrepreneurs et des managers capables de faire bouger les lignes.
Véritable laboratoire d'idées, elle produit des solutions innovantes reconnues par les entreprises.
Ses travaux de recherche irriguent son enseignement fondé sur la culture du «build people to build business» et du « learning by doing ».
