Testing for Random Walk and Structural Breaks in Hedge Funds Returns

CFA Digest ◽  
2006 ◽  
Vol 36 (4) ◽  
pp. 9-10
Author(s):  
Charles F. Peake
Keyword(s):  
Random Walk ◽  
Hedge Funds ◽  
Structural Breaks ◽  
Hedge Funds Returns

TESTING FOR RANDOM WALK AND STRUCTURAL BREAKS IN HEDGE FUNDS RETURNS

2006 ◽  
Vol 09 (03) ◽  
pp. 341-358 ◽  
Author(s):  
MARIO CERRATO ◽  
ANDREA IANNELLI
Keyword(s):  
Random Walk ◽  
Hedge Funds ◽  
Structural Breaks ◽  
A Priori ◽  
Excess Returns ◽  
Managerial Skills ◽  
Managerial Skill ◽  
Initial Hypothesis ◽  
Hedge Funds Returns ◽  
Drift Parameter

We investigate the presence of managerial skills in different categories of hedge funds. Our approach is more flexible that others [7, 10] since it does not make any a priori assumptions regarding the distribution of returns. We find that the Global Macro and Market Neutral funds do not follow a pure random walk. In fact, for both these models the drift parameter is statistically significant. This result rejects our initial hypothesis that hedge funds (expected-excess) returns are on average zero. Indeed, the positive intercept can be interpreted as evidence of managerial skill. We conclude that investors seeking to invest in hedge funds should consider Market Neutral funds and Global Macro funds as possible investments.

Tracking hedge funds returns using sparse clones

2016 ◽  
Vol 266 (1-2) ◽  
pp. 349-371 ◽  
Author(s):  
Margherita Giuzio ◽  
Kay Eichhorn-Schott ◽  
Sandra Paterlini ◽  
Vincent Weber
Keyword(s):  
Hedge Funds ◽  
Hedge Funds Returns

ON DISTINGUISHING BETWEEN RANDOM WALK AND CHANGE IN THE MEAN ALTERNATIVES

2009 ◽  
Vol 25 (2) ◽  
pp. 411-441 ◽  
Author(s):  
Alexander Aue ◽  
Lajos Horváth ◽  
Marie Hušková ◽  
Shiqing Ling
Keyword(s):  
Random Walk ◽  
Structural Breaks ◽  
Stock Index ◽  
Partial Sums ◽  
Test Statistics ◽  
Test Procedures ◽  
Change In The Mean ◽  
German Stock ◽  
The Mean ◽  
Almost All

We study test procedures that detect structural breaks in underlying data sequences. In particular, we wish to discriminate between different reasons for these changes, such as (1) shifting means, (2) random walk behavior, and (3) constant means but innovations switching from stationary to difference stationary behavior. Almost all procedures presently available in the literature are simultaneously sensitive to all three types of alternatives.The test statistics under investigation are based on functionals of the partial sums of observations. These cumulative sum–type (CUSUM-type) statistics have limit distributions if the mean remains constant and the errors satisfy the central limit theorem but tend to infinity in the case when any of the alternatives (1), (2), or (3) holds. On removing the effect of the shifting mean, however, divergence of the test statistics will only occur under the random walk behavior, which in turn enables statisticians not only to detect structural breaks but also to specify their causes.The results are underlined by a simulation study and an application to returns of the German stock index DAX.

Skewness in hedge funds returns: classical skewness coefficients vs Azzalini's skewness parameter

2010 ◽  
Vol 6 (4) ◽  
pp. 290-304 ◽  
Author(s):  
Martin Eling ◽  
Simone Farinelli ◽  
Damiano Rossello ◽  
Luisa Tibiletti
Keyword(s):  
Hedge Funds ◽  
Skewness Parameter ◽  
Hedge Funds Returns

scholarly journals Reviewing the hedge funds literature II: Hedge funds' returns and risk management characteristics

2016 ◽  
Vol 48 ◽  
pp. 55-66 ◽  
Author(s):  
Izidin El Kalak ◽  
Alcino Azevedo ◽  
Robert Hudson
Keyword(s):  
Risk Management ◽  
Hedge Funds ◽  
Hedge Funds Returns

On Optimal Instrumental Variables Generators: An Application to Hedge Funds Returns

2008 ◽  
Vol 14 (4) ◽  
pp. 473-474
Author(s):  
François-Éric Racicot ◽  
Raymond Théoret
Keyword(s):  
Instrumental Variables ◽  
Hedge Funds ◽  
Hedge Funds Returns

scholarly journals Testing for the Presence of a Random Walk in Series with Structural Breaks

2001 ◽  
Vol 22 (2) ◽  
pp. 127-150 ◽  
Author(s):  
Fabio Busetti ◽  
Andrew Harvey
Keyword(s):  
Random Walk ◽  
Structural Breaks ◽  
In Series
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