Risks and Portfolio Decisions Involving Hedge Funds

Clicks: 1
ID: 294950
2003
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Abstract
This article characterizes the systematic risk exposures of hedge funds using buy-and-hold and option-based strategies. Our results show that a large number of equity-oriented hedge fund strategies exhibit payoffs resembling a short position in a put option on the market index and therefore bear significant left-tail risk, risk that is ignored by the commonly used mean-variance framework. Using a mean-conditional value-at-risk framework, we demonstrate the extent to which the mean-variance framework underestimates the tail risk. Finally, working with the systematic risk exposures of hedge funds, we show that their recent performance appears significantly better than their long-run performance.
Reference Key
openalex_W2098996963 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Vikas Agarwal, Narayan Y. Naik
Journal review of financial studies
Year 2003
DOI
10.1093/rfs/hhg044
URL
Keywords Keywords not found

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