Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 2 of 2
Full-Text Articles in Business
How Surprising Are Returns In 2008? A Review Of Hedge Fund Risks, Melvyn Teo
How Surprising Are Returns In 2008? A Review Of Hedge Fund Risks, Melvyn Teo
Research Collection BNP Paribas Hedge Fund Centre
Many investors, expecting absolute returns, were shocked by the dismal performance of various hedge fund investment strategies in 2008. In this issue of the statistical digest, I review the academic literature on hedge fund risks and conduct some simple analyses. I find that many hedge funds, even those without directional equity exposure, have payoffs that resemble those from writing put options on equity indices. A central theme is that their strategies all involve being short liquidity. Therefore, these hedge funds tend to underperform during liquidity crises, which coincide with extreme bear markets.
Hedge Funds In A Volatile Market, Melvyn Teo
Hedge Funds In A Volatile Market, Melvyn Teo
Research Collection BNP Paribas Hedge Fund Centre
We show that relative to the first half of 2007, the volatility of hedge fund returns has doubled during the September 2007 to April 2008 period. At the same time, aggregate hedge fund returns have declined while exit rates have tripled. Commodity, macro, and, to a lesser extent, arbitrage funds outperformed during this period, while bottom-up funds underperformed. In Asia, funds engaging in less traditional strategies like arbitrage, event driven, fixed income, and distressed debt have emerged relatively unscathed. Our results also suggest that around the world, funds with headquarters near their investment markets, fewer assets under management, and higher …