Newton, David, Platanakis, Emmanouil, Stafylas, Dimitrios, Sutcliffe, Charles and Ye, Xiaoxia ORCID: 0000-0002-5024-6186
(2021)
Hedge Fund Strategies, Performance Diversification: A Portfolio Theory & Stochastic Discount Factor Approach.
The British Accounting Review, 53 (5).
p. 101000.
Text
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Abstract
For 5500 North American hedge funds following 11 different strategies, we analyse the stand-alone performance of these strategies using a stochastic discount factor approach. Employing the same data, we then consider the diversification benefits of each hedge fund strategy when combined with a portfolio of US equities and bonds. We compute the out-of-sample Black-Litterman portfolios, with Bayes-Stein, higher moments, simulations, desmoothed data and allowance for regimes as robustness checks. All but two hedge fund strategies out-perform the market as stand-alone investments; and all but one provide significant diversification benefits. The higher is an investor's risk aversion, the more beneficial is diversification into hedge funds.
Item Type: | Article |
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Additional Information: | Source info: The British Accounting Review, Forthcoming |
Uncontrolled Keywords: | Hedge funds, Portfolio diversification, Black-Litterman, Bayes-Stein, Stochastic discount factors |
Divisions: | Faculty of Humanities and Social Sciences > School of Management |
Depositing User: | Symplectic Admin |
Date Deposited: | 29 Mar 2021 13:40 |
Last Modified: | 27 Mar 2023 01:30 |
DOI: | 10.1016/j.bar.2021.101000 |
Related URLs: | |
URI: | https://livrepository.liverpool.ac.uk/id/eprint/3118191 |