Klassifizierung von Hedge-Fonds durch das k-means Clustering von Self-Organizing Maps: eine renditebasierte Analyse zur Selbsteinstufungsgüte und Stiländerungsproblematik
[Classifying Hedge Funds using k-means Clustering of Self-Organizing Maps: a return-based analysis of misclassification and the problem of style creep]
AbstractThrough an implementation of the 2-level-approach due to Vesanto & Alhoniemi (2000), this paper addresses a number of problems typically seen when visualized interpretation of Self Organizing Maps (SOM) are applied to derive a systematic classification system in the hedge fund literature. Normally, a trained SOM does not result in an exact depiction of the detected structures of the input data, and is therefore challenging for visual interpretations. The 2-level-approach overcomes this problem and assures a consistent clustering of neighboring output units, and therefore an objective classification scheme. Through an empirical application, such an objective classification is derived. Building on this, further analyses concerning the misclassification and style creep problems are conducted. Within the ten-year sample period (31.01.1999 to 31.12.2008), which comprises 2789 hedge funds, organized in eleven strategies, six classes can be identified. This six-class taxonomy is fairly robust to different sub-sample periods, topologies and data-samples. According to the classification system applied here, it is shown that most of the analyzed hedge funds are inconsistent in their self-declared strategies. Furthermore, evidence of undisclosed trading style changes over time is identified – specifically, it is shown that misclassified hedge funds are more likely to change their trading style.
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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16939.
Date of creation: 25 Aug 2009
Date of revision:
Self-Organizing Maps; Clustering; Klassifzierung; Hedge-Fonds; Style Creep;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Glenn Milligan & Martha Cooper, 1985. "An examination of procedures for determining the number of clusters in a data set," Psychometrika, Springer, vol. 50(2), pages 159-179, June.
- Carl Ackermann & Richard McEnally & David Ravenscraft, 1999. "The Performance of Hedge Funds: Risk, Return, and Incentives," Journal of Finance, American Finance Association, vol. 54(3), pages 833-874, 06.
- Brown, Stephen J. & Goetzmann, William N., 1997.
"Mutual fund styles,"
Journal of Financial Economics,
Elsevier, vol. 43(3), pages 373-399, March.
- Stephen Brown & William Goetzmann, 2001.
"Hedge Funds With Style,"
Yale School of Management Working Papers
ysm21, Yale School of Management, revised 01 Apr 2008.
- 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.
- Fung, William & Hsieh, David A, 2001. "The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 313-41.
- Mangiameli, Paul & Chen, Shaw K. & West, David, 1996. "A comparison of SOM neural network and hierarchical clustering methods," European Journal of Operational Research, Elsevier, vol. 93(2), pages 402-417, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.