Accessibility navigation


Hedge fund strategies, performance & diversification: a portfolio theory & stochastic discount factor approach

Newton, D., Platanakis, E., Stafylas, D., Sutcliffe, C. ORCID: https://orcid.org/0000-0003-0187-487X and Ye, X. (2021) Hedge fund strategies, performance & diversification: a portfolio theory & stochastic discount factor approach. The British Accounting Review. ISSN 0890-8389

[img] Text - Accepted Version
· Restricted to Repository staff only until 27 March 2023.
· Available under License Creative Commons Attribution Non-commercial No Derivatives.

1MB

It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

To link to this item DOI: 10.1016/j.bar.2021.101000

Abstract/Summary

For 5,500 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
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:97029
Publisher:Elsevier

University Staff: Request a correction | Centaur Editors: Update this record

Page navigation