An Alternative Approach to Alternative Beta
AbstractHedge fund replication based on factor models is encountering growing interest. In this paper, we investigate the implications of substituting standard rolling windows regressions, which appear ad-hoc, with more efficient methodologies like the Kalman filter. We show that the copycats constructed this way offer risk-return profiles which share several characteristics with the ones posted by hedge funds indices: Sharpe ratios above buy-and-hold strategies on standard assets, moderate correlation with tandard assets, and limited drawdowns during equity downward trends. An interesting result is that the shortfall risk seems less important than with hedge fund indices and regressions-based trackers. We finally propose new breakdowns of hedge fund erformance into alpha, traditional beta, and alternative beta.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Capco Institute in its journal Journal of Financial Transformation.
Volume (Year): 24 (2008)
Issue (Month): ()
Contact details of provider:
Postal: 120 Broadway, 29th Floor New York, NY 10271
Phone: +1 212 284 8600
Web page: http://www.capco.com/
hedge fund replication; alternative beta; Kalman filter;
Other versions of this item:
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Roncalli, Thierry & Weisang, Guillaume, 2011.
"Tracking Problems, Hedge Fund Replication, and Alternative Beta,"
Journal of Financial Transformation,
Capco Institute, vol. 31, pages 19-29.
- Roncalli, Thierry & Weisang, Guillaume, 2008. "Tracking problems, hedge fund replication and alternative beta," MPRA Paper 37358, University Library of Munich, Germany.
- Sam Nasypbek & Scheherazade S Rehman, 2011. "Explaining the returns of active currency managers," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 211-256 Bank for International Settlements.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Springett).
If references are entirely missing, you can add them using this form.