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.
Auteur(s) :
Research Associate, Edhec Risk and Asset Management Research Centre - Business 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.
| Type : | Position paper |
|---|---|
| Date : | le 09/01/2006 |
| Pôle de recherche | Finance |
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