Measuring risk in the hedge fund sector
AbstractRecent high correlations among hedge fund returns could suggest concentrations of risk comparable to those preceding the hedge fund crisis of 1998. A comparison of the current rise in correlations with the elevation before the 1998 event, however, reveals a key difference. The current increase stems mainly from a decline in the volatility of returns, while the earlier rise was driven by high covariances - an alternative measure of comovement in dollar terms. Because volatility and covariances are lower today, the current hedge fund environment differs from the 1998 environment.>
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Bibliographic InfoArticle provided by Federal Reserve Bank of New York in its journal Current Issues in Economics and Finance.
Volume (Year): 13 (2007)
Issue (Month): Mar ()
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