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Trend-following hedge funds and multi-period asset allocation

Author

Listed:
  • Dries Darius
  • Aytac Ilhan
  • John Mulvey
  • Koray Simsek
  • Ronnie Sircar

Abstract

Selected hedge funds employ trend-following strategies in an attempt to achieve superior risk-adjusted returns. We employ a lookback straddle approach for evaluating the return characteristics of a trend-following strategy. The strategies can improve investor performance in the context of a multi-period dynamic portfolio model. The gains are achieved by taking advantage of the funds' high level of volatility. A set of empirical results confirms the advantages of the lookback straddle for investors at the top end of the multi-period efficient frontier.

Suggested Citation

  • Dries Darius & Aytac Ilhan & John Mulvey & Koray Simsek & Ronnie Sircar, 2002. "Trend-following hedge funds and multi-period asset allocation," Quantitative Finance, Taylor & Francis Journals, vol. 2(5), pages 354-361.
    • Handle: RePEc:taf:quantf:v:2:y:2002:i:5:p:354-361
    DOI: 10.1088/1469-7688/2/5/304
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    Cited by:

    1. Michael A. H. Dempster & Igor V. Evstigneev & Klaus R. Schenk-hoppe, 2007. "Volatility-induced financial growth," Quantitative Finance, Taylor & Francis Journals, vol. 7(2), pages 151-160.
    2. Martin Eling & Simone Farinelli & Damiano Rossello & Luisa Tibiletti, 2010. "Skewness in hedge funds returns: classical skewness coefficients vs Azzalini's skewness parameter," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 6(4), pages 290-304, September.

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