An Omega Ratio Analysis Of Global Hedge Fund Returns

An Excursion Into The Statistical Properties of Hedge Fund Returns

This paper provides an overview of the most important statistical properties of individual hedge fund returns. We find that the net-of-fees monthly returns of the average individual hedge fund exhibit significant skewness, excess kurtosis, as well as positive first-order serial correlation. The correlations between hedge funds in the same strategy group are of a similar order of magnitude as th...

Sentiment Risk and Hedge Fund Returns

This paper documents a new and important cross-sectional determinant of hedge fund returns, their exposures to sentiment risk, measured as beta of fund returns to fluctuations in sentiment proxies. For a large sample of equity-oriented hedge funds, those whose sentiment beta ranks in the top decile subsequently outperform the bottom decile by 0.67% per month, after controlling for fund’s exposu...

Asymmetric Returns and Optimal Hedge Fund Portfolios

THE JOURNAL OF ALTERNATIVE INVESTMENTS 9 I t is now well established that the construction of optimal hedge fund portfolios requires techniques that reach well beyond traditional mean variance analysis. For example, Brooks and Kat [2002] demonstrate that various hedge fund strategies have more downside than upside risk—returns exhibit negative skew and excess kurtosis. Lo [2001] and Anson [2002...

Failure Risk and the Cross-Section of Hedge Fund Returns

On average, hedge funds experience slow failures rather than sudden crashes. I model a fund’s probability of failure using a dynamic logit regression and find that fund failures are predicted by even 7-month lagged information. Hedge funds fail slowly as investors withdraw their funds over a period of time because of poor performance. Also, longer share restriction periods and the presence of m...

Systematic risk and the cross-section of hedge fund returns