Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe fail to capture some crucial aspects due to the strong non-Gaussian character of Hedge Funds statistics. A possible way out to this problem while keeping the CA...

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...

Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires a high precision risk evaluation and an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe fail to capture some crucial aspects due to the strong non-Gaussian character of Hedge Funds statistics. A possible way out...

The returns to hedge funds and other alternative investments are often highly serially correlated. In this paper, we explore several sources of such serial correlation and show that the most likely explanation is illiquidity exposure and smoothed returns. We propose an econometric model of return smoothing and develop estimators for the smoothing profile as well as a smoothing-adjusted Sharpe r...

Motivated by the debate about the economic consequences of mandatory adoption of International Financial Reporting Standards (IFRS), this study investigates the effect of hedge accounting under IFRS on corporate risk management. Using a sample of large UK non-financial firms from 2003 to 2008, we show that the implementation of the new standards reduces the level of asymmetric information faced...

The paper investigates the strategic behavior of hedge fund families. It focuses on decisions to start and liquidate family-member funds. Hedge fund families tend to liquidate funds that underperform compared to other member funds, and to replace them by new ones. By choosing a launch time after a short period of superior performance by their member funds, families extend the spillover to new f...

This paper analyzes the performance of two hedging strategies on three different options when trading is limited to take place at discrete times. Specifically, we compare the mean, standard deviation, skewness, and kurtosis of the hedging error resulting from applying a delta hedge and mean square optimal hedge to a European call option, a digital call option, and a down-and-out barrier call op...