Style Analysis and Value-at-Risk of Asia-Focused Hedge Funds

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چکیده

In this paper we identify risk factors for Asia-focused hedge funds through a modified style analysis technique. Using an Asian hedge fund index, we find that Asian hedge funds show significant positive exposures to emerging equity marketsand also hold significant portion of portfolio in cash and high credit rating bonds while they take short positions in world government and emerging market bonds. A rolling window style analysis is further employed to analyse the time-varying risk exposure of Asian hedge funds. For both a static and rolling period style analysis, our model provides a high explanatory power for returns of the considered hedge fund index. We further conduct a Value-at-Risk analysis using the results of a rolling window style analysis as inputs. Our results indicate that the accuracy of VaR models is dominated by their ability to capture the tail distribution of the hedge fund returns. Moreover, the distributional assumption seems to be more important than the chosen volatility model for the performance of the models in VaR prediction. Our findings further suggest that the considered parametric models outperform a simple historical simulation that is purely based on past return observations.

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تاریخ انتشار 2010