Performance and Risk Measurement Challenges For Hedge Funds: Empirical Considerations
AbstractHedge funds are said to be rewarding investments because they have favourable risk-return characteristics on a standalone basis, and because they offer valuable diversification with respect to traditional stock and bond markets. On the other hand, hedge fund returns have a number of characteristics that make their quantitative analysis difficult: distributions are often asymmetric and have an increased tendency towards extreme outcomes ("heavy tails"), and dependence structures with respect to traditional markets are often complex. Moreover, quality and quantity of available data may be limited. In this study, we survey and present a number of quantitative analysis techniques that are able to cope with the particular characteristics of hedge funds, including methods for extreme value analysis and non- standard dependence models.
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Bibliographic InfoPaper provided by EconWPA in its series Risk and Insurance with number 0311001.
Length: 20 pages
Date of creation: 05 Nov 2003
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hedge funds; risk measurement; risk management;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-09 (All new papers)
- NEP-FIN-2003-11-09 (Finance)
- NEP-RMG-2003-11-09 (Risk Management)
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