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A Comparison Of South African Hedge Fund Risk Measures

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  • Marius Botha

Abstract

Although hedge funds have enjoyed unrivalled dominance after years of stellar returns, a combination of low interest rates, sustained economic growth and diminished arbitrage opportunities now threaten them. Distinguishing between funds – an onerous task with notoriously opaque investment strategies – has become paramount in the search for optimal returns. Simple risk and return performance measures cannot cope with the demands of an increasingly complex financial milieu. Interest has thus focused on more effective discriminatory performance measures. The innovative Omega ratio is calculated for South African hedge funds and compared with both Sharpe and Sortino ratios. Omega emerges as the superior measure.

Suggested Citation

  • Marius Botha, 2007. "A Comparison Of South African Hedge Fund Risk Measures," South African Journal of Economics, Economic Society of South Africa, vol. 75(3), pages 459-477, September.
    • Handle: RePEc:bla:sajeco:v:75:y:2007:i:3:p:459-477
    DOI: 10.1111/j.1813-6982.2007.00131.x
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    References listed on IDEAS

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    1. William Fung & David A. Hsieh & Narayan Y. Naik & Tarun Ramadorai, 2008. "Hedge Funds: Performance, Risk, and Capital Formation," Journal of Finance, American Finance Association, vol. 63(4), pages 1777-1803, August.
    2. Shin, Hyun Song, 2008. "Risk and liquidity in a system context," Journal of Financial Intermediation, Elsevier, vol. 17(3), pages 315-329, July.
    3. Financial Systems and Bank Examination Department & Financial Markets Department, 2006. "Recent Developments in Hedge Funds," Bank of Japan Research Papers 2006-06-13, Bank of Japan.
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    Cited by:

    1. Živkov, Dejan & Kuzman, Boris & Japundžić, Miloš, 2025. "Using metals to hedge carbon emission allowances – Tail-risk and Omega ratio analysis," Resources Policy, Elsevier, vol. 100(C).

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