a r t i c l e i n f o In this paper, we explore the impact of investor time-horizon on an optimal downside hedged energy portfolio. The optimal heating oil hedge ratio is first calculated for a variety of downside risk objective functions at different time-horizons using the wavelet transform. Next, associated hedging effectiveness is contrasted for a range of risk metrics, with all metrics sho...

Main academic criticism on the Sharpe ratio concerns its lack in incorporating skewness in performance evaluation. In this note we rewrite the classical Sharpe ratio for skew normal distributions. This new skew-normal Shape ratio consistently moves with skewness and no distorted information on performance is provided. An empirical investigation illustrates skew-normality of mutual and hedge fun...

Using cross-sectional forecasts, we compare fundamental analysis strategies based on quality, such as FSCORE from Piotroski (2000) and GSCORE from Mohanram (2005), with strategies based on value, such as the V/P ratio from Frankel and Lee (1998) and the PEG ratio. We find that all four strategies generate significant hedge returns. Combining quality-driven (FSCORE or GSCORE) with value-driven a...

This article documents a decline in aggregate hedge fund performance over the past decade. We tested whether set of prediction models can select subsets individual funds that buck trend and subsequently outperform. Two predictors reliably picked lowered volatility raised Sharpe ratio multi-asset-class portfolio relative to stock/bond full 1997–2016 sample. Hedge allocations reduced two subperio...

This research attempts to develop an analytical framework for hedge fund investment. Various issues related to the hedge fund investment have been addressed. This paper focuses on three distinct areas of hedge fund research, namely, bias in hedge fund data, the classification of hedge funds, and performance attribution of hedge funds. All studies, reported in this paper, have been carried out u...

Hedge fund databases vary as to the type of funds to include and in their classification scheme. Investment strategy and/or investment style are the basis for classification. Considerable variation is observed in the definitions, return calculation methodologies, and assumptions. There exists a myriad of classifications, some overlapping and some mutually exclusive. There is a need for an ‘alte...

We explore optimal hedge ratios and hedging effectiveness for the German electricity market. Given the increasing attention that wavelets received in the financial market, we concentrate on the investigation of the relationship, covariance/coherence evolution and hedge ratio analysis, on a time-frequency-scale approach (discrete and continuous), between electricity spot and futures. Simpler app...

We examine the value of fund of funds (FoFs) using a new database of the funds’ hedge fund holdings. This data allows a first ever look at the types of hedge funds that FoFs select, as well the ability to gauge the FoFs’ skill at hiring and firing hedge fund managers. We find that FoFs hire larger, younger, and more illiquid hedge funds that have positive past performance. FoFs select hedge fun...

We propose an algebra of regular hedge expressions built on top of regular hedge grammars as a framework for the analysis and manipulation of hedge languages. We show how linear systems of hedge language equations (LS for short) can be used as an intermediate representation on which to perform the computation of quotient, intersection, product derivative, and factor matrix of regular hedge lang...