A Tail of Two Cities:On the Downside Risk and LossProfile of Asian and North American Hedge Funds

2016 ◽  
Vol 19 (1) ◽  
pp. 55-77
Author(s):  
Joseph Cherian ◽  
Christine Kon ◽  
William Weng
Keyword(s):  
North American ◽  
Hedge Funds ◽  
Downside Risk

Efficient fund of hedge funds construction under downside risk measures

2006 ◽  
Vol 30 (2) ◽  
pp. 503-518 ◽  
Author(s):  
David P. Morton ◽  
Elmira Popova ◽  
Ivilina Popova
Keyword(s):  
Hedge Funds ◽  
Risk Measures ◽  
Downside Risk

Zero-R2Hedge Funds and Market Neutrality

2013 ◽  
Vol 48 (2) ◽  
pp. 519-547 ◽  
Author(s):  
Nicolas P. B. Bollen
Keyword(s):  
Hedge Funds ◽  
Systematic Risk ◽  
Downside Risk ◽  
Probability Of Failure ◽  
Factor Models ◽  
Idiosyncratic Volatility ◽  
Sharpe Ratios ◽  
Alternative Investment

AbstractFactor models yield an R2 insignificantly different from 0 for one-third of hedge funds in a broad sample. These funds illustrate the concept of market neutrality and feature lower volatilities, higher Sharpe ratios, and higher alphas than other funds, indicating that they provide a successful alternative investment. However, large portfolios of zero-R2 funds contain fully half the volatility of portfolios of other funds, suggesting that they feature substantial systematic risk. Furthermore, these funds display an increased probability of failure even after controlling for idiosyncratic volatility. These results indicate the presence of an omitted factor that exposes investors to significant downside risk.

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