The risk in hedge fund strategies: Theory and evidence from trend followers
Publication
, Journal Article
Fung, W; Hsieh, DA
Published in: Review of Financial Studies
January 1, 2001
Hedge fund strategies typically generate option-like returns. Linear-factor models using benchmark asset indices have difficulty explaining them. Following the suggestions in Glosten and Jagannathan (1994), this article shows how to model hedge fund returns by focusing on the popular "trend-following" strategy. We use lookback straddles to model trend-following strategies, and show that they can explain trend-following funds' returns better than standard asset indices. Though standard straddles lead to similar empirical results, lookback straddles are theoretically closer to the concept of trend following. Our model should be useful in the design of performance benchmarks for trend-following funds.
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Published In
Review of Financial Studies
DOI
ISSN
0893-9454
Publication Date
January 1, 2001
Volume
14
Issue
2
Start / End Page
313 / 341
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory
Citation
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Fung, W., & Hsieh, D. A. (2001). The risk in hedge fund strategies: Theory and evidence from trend followers. Review of Financial Studies, 14(2), 313–341. https://doi.org/10.1093/rfs/14.2.313
Fung, W., and D. A. Hsieh. “The risk in hedge fund strategies: Theory and evidence from trend followers.” Review of Financial Studies 14, no. 2 (January 1, 2001): 313–41. https://doi.org/10.1093/rfs/14.2.313.
Fung W, Hsieh DA. The risk in hedge fund strategies: Theory and evidence from trend followers. Review of Financial Studies. 2001 Jan 1;14(2):313–41.
Fung, W., and D. A. Hsieh. “The risk in hedge fund strategies: Theory and evidence from trend followers.” Review of Financial Studies, vol. 14, no. 2, Jan. 2001, pp. 313–41. Scopus, doi:10.1093/rfs/14.2.313.
Fung W, Hsieh DA. The risk in hedge fund strategies: Theory and evidence from trend followers. Review of Financial Studies. 2001 Jan 1;14(2):313–341.
Published In
Review of Financial Studies
DOI
ISSN
0893-9454
Publication Date
January 1, 2001
Volume
14
Issue
2
Start / End Page
313 / 341
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory