Dynamic risk exposures in hedge funds
AbstractA regime-switching beta model is proposed to measure dynamic risk exposures of hedge funds to various risk factors during different market volatility conditions. Hedge fund exposures strongly depend on whether the equity market (S&P 500) is in the up, down, or tranquil regime. In the down-state of the market, when market volatility is high and returns are very low, S&P 500, Small–Large, Credit Spread, and VIX are common risk factors for most of the hedge fund strategies. This suggests that hedge fund exposures to the market, liquidity, credit, and volatility risks change depending on market conditions, and these risks are potentially common factors for the hedge fund industry in the down-state of the market.
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Bibliographic InfoArticle provided by Elsevier in its journal Computational Statistics & Data Analysis.
Volume (Year): 56 (2012)
Issue (Month): 11 ()
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Web page: http://www.elsevier.com/locate/csda
Hedge funds; Regime-switching models; Risk management; Liquidity; Financial crises;
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
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