Do higher-moment equity risks explain hedge fund returns?
AbstractHedge funds are fundamentally exposed to equity volatility, skewness, and kurtosis risks based on the systematic pattern and significant spread in alphas from the existing models that do not control for the higher-moment risks. The spread and pattern in alphas do not disappear with bootstrap simulation, Bayesian analysis to account for potential estimation error, adjustment for backfilling bias, and the inclusion of additional systematic factors. Significant cross-sectional variation in higher-moment exposures is observed across fund styles with equity-oriented styles displaying more extreme exposures. Investable higher-moment factors explain the time series behavior of returns of a large number of Managed Futures, Event Driven, and Long/Short Equity hedge funds. Average exposure sensitivities for higher-moment factors are statistically significant in an estimation that accounts for style fixed effects and fund random effects. --
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 of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 10-07.
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: Albertus Magnus Platz, 50923 Köln
Phone: 0221 / 470 5607
Fax: 0221 / 470 5179
Web page: http://cfr-cologne.de/english/version06/html/home.php
More information through EDIRC
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Chang, Bo Young & Christoffersen, Peter & Jacobs, Kris, 2013. "Market skewness risk and the cross section of stock returns," Journal of Financial Economics, Elsevier, vol. 107(1), pages 46-68.
- Bali, Turan G. & Brown, Stephen J. & Caglayan, Mustafa Onur, 2012. "Systematic risk and the cross section of hedge fund returns," Journal of Financial Economics, Elsevier, vol. 106(1), pages 114-131.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.