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A note on statistical models for individual hedge fund returns

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  • Ryozo Miura
  • Yoshimitsu Aoki
  • Daisuke Yokouchi

Abstract

In recent years, a large number of research papers and monographs on the analysis of hedge fund returns have been published. Typically, the authors of these studies implicitly or explicitly treat monthly returns of hedge funds as independent and identically distributed observations. The Hedge Fund Index might be able to serve that role. But the returns of an individual hedge fund are not like that. They behave autoregressively depending on the time periods. This stochastic behavior should be modeled as a combined/regime switching stochastic process of two processes: i.i.d. process and autoregressive process. This paper first depicts the autoregressiveness of hedge fund returns. Then we introduce our statistical model for returns of an individual hedge fund and then, with our retrospective view, we perform several data analyses for individual hedge funds’ return data. Copyright Springer-Verlag 2009

Suggested Citation

  • Ryozo Miura & Yoshimitsu Aoki & Daisuke Yokouchi, 2009. "A note on statistical models for individual hedge fund returns," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 69(3), pages 553-577, July.
    • Handle: RePEc:spr:mathme:v:69:y:2009:i:3:p:553-577
    DOI: 10.1007/s00186-008-0251-8
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    References listed on IDEAS

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    1. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
    2. Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," The Journal of Business, University of Chicago Press, vol. 54(4), pages 513-533, October.
    3. Nicolas P. B. Bollen & Jeffrey A. Busse, 2001. "On the Timing Ability of Mutual Fund Managers," Journal of Finance, American Finance Association, vol. 56(3), pages 1075-1094, June.
    4. Fung, William & Hsieh, David A, 1997. "Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 275-302.
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    Cited by:

    1. Yokouchi, Daisuke & 横内, 大介 & Kato, Takeshi & Aoki, Yoshimitsu, 2020. "An Approach to Modeling on Financial Time Series Data with Regime Shifts," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 53(1), pages 21-30, February.

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