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Are Chinese market-neutral strategy hedge funds really market neutral?

Author

Listed:
  • Xucheng Huang
  • Jie Sun

Abstract

Purpose - The purpose of this paper is to empirically analyze the “market-neutral” characteristics of the market-neutral strategy hedge funds in Chinese A-share market. Design/methodology/approach - The analyses in the paper are conducted to study the market-neutral characteristics by means of index analysis, correlation analysis,β-neutral analysis and the three-factor model analysis. Findings - The results show that the performance advantage of the market-neutral strategy hedge funds is obvious. Most market-neutral strategy funds are exposed to market risks and theαstrategy funds also have obvious style factor exposure; strictly speaking, all of the market-neutral strategies have not reached the “market-neutral” requirements. This paper also finds that Chinese trading restrictions on stock index futures in September 2015 have a significant impact on Chinese market-neutral strategy hedge funds. Originality/value - The conclusion of this paper has a certain reference value for understanding the risk characteristics and possible problems of hedge funds in emerging markets, and also has important reference value for investors.

Suggested Citation

  • Xucheng Huang & Jie Sun, 2017. "Are Chinese market-neutral strategy hedge funds really market neutral?," China Finance Review International, Emerald Group Publishing Limited, vol. 8(1), pages 21-42, December.
    • Handle: RePEc:eme:cfripp:cfri-04-2017-0033
    DOI: 10.1108/CFRI-04-2017-0033
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    Citations

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    Cited by:

    1. Ba, Shusong & Li, Lu & Huang, Wenli & Yang, Chen, 2020. "Heterogeneity risks and negative externality," Economic Modelling, Elsevier, vol. 87(C), pages 401-415.
    2. Li, Xiangwen & Wu, Wenfeng, 2019. "Portfolio pumping and fund performance ranking: A performance-based compensation contract perspective," Journal of Banking & Finance, Elsevier, vol. 105(C), pages 94-106.

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