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Hedge Fund Performance: Sources And Measures

Author

Listed:
  • ERNST EBERLEIN

    (Department of Mathematical Stochastics, University of Freiburg, Germany)

  • DILIP B. MADAN

    (Robert H. Smith School of Business, University of Maryland, College Park, MD. 20742, USA)

Abstract

The concept of the gamma of a financed return as the highest level of stress that a return distribution can withstand is introduced. Stress is measured by positive expectation under a concave distortion of the return distribution accessed. Four distortions introduced in Cherny and Madan (2008) are employed in studying the distribution of returns available in the hedge fund universe. It is shown that the skewness, peakedness and tailweightedness of the standardized investment return significantly affects the Sharpe ratios required to reach a target gamma level.

Suggested Citation

  • Ernst Eberlein & Dilip B. Madan, 2009. "Hedge Fund Performance: Sources And Measures," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 267-282.
    • Handle: RePEc:wsi:ijtafx:v:12:y:2009:i:03:n:s0219024909005282
    DOI: 10.1142/S0219024909005282
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    References listed on IDEAS

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    1. Hanqing Jin & Xunyu Zhou, 2007. "Behavioral Portfolio Selection in Continuous Time," Papers 0709.2830, arXiv.org.
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    Cited by:

    1. Rand Kwong Yew Low, 2018. "Vine copulas: modelling systemic risk and enhancing higher‐moment portfolio optimisation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(S1), pages 423-463, November.
    2. Yoshihiro Shirai, 2023. "Acceptable Bilateral Gamma Parameters," Papers 2301.05333, arXiv.org.
    3. Mehdi Vazifedan & Qiji Jim Zhu, 2020. "No-Arbitrage Principle in Conic Finance," Risks, MDPI, vol. 8(2), pages 1-34, June.
    4. Dilip B. Madan, 2016. "Conic Portfolio Theory," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(03), pages 1-42, May.
    5. Dilip Madan, 2011. "Joint risk-neutral laws and hedging," IISE Transactions, Taylor & Francis Journals, vol. 43(12), pages 840-850.
    6. Beatrice D. Simo-Kengne & Kofi A. Ababio & Jules Mba & Ur Koumba, 2018. "Behavioral portfolio selection and optimization: an application to international stocks," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 32(3), pages 311-328, August.
    7. Dilip B. Madan & King Wang, 2022. "Two sided efficient frontiers at multiple time horizons," Annals of Finance, Springer, vol. 18(3), pages 327-353, September.

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