Hedge Fund Return Correlation under Extreme Market Condition

Hedge Fund Return Correlation under Extreme Market Condition

How dependent are returns across hedge fund investment strategies? We estimate the probability that each investment strategy performs poorly when other investment strategies are delivering extreme negative returns. Under extreme market conditions, we find that event driven, distressed debt, and equi...

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Main Author: TEO, Melvyn
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2012
Subjects:
hedge funds
correlation
investment strategies
Asian hedge funds
Finance and Financial Management
Online Access:https://ink.library.smu.edu.sg/bnp_research/28
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1025&context=bnp_research
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Institution: Singapore Management University
Language: English
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spelling sg-smu-ink.bnp_research-10252018-06-13T02:43:28Z Hedge Fund Return Correlation under Extreme Market Condition TEO, Melvyn How dependent are returns across hedge fund investment strategies? We estimate the probability that each investment strategy performs poorly when other investment strategies are delivering extreme negative returns. Under extreme market conditions, we find that event driven, distressed debt, and equity long/short funds exhibit the highest correlation with other styles while commodity trading advisors, macro, and equity market neutral funds exhibit the lowest correlation. In addition, we show that Asia-focused event driven and equity market neutral funds provide diversification for investors holding US- and Europe-focused funds. 2012-03-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/bnp_research/28 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1025&context=bnp_research http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection BNP Paribas Hedge Fund Centre eng Institutional Knowledge at Singapore Management University hedge funds correlation investment strategies Asian hedge funds Finance and Financial Management
institution Singapore Management University
building SMU Libraries
country Singapore
collection InK@SMU
language English
topic hedge funds
correlation
investment strategies
Asian hedge funds
Finance and Financial Management
spellingShingle hedge funds
correlation
investment strategies
Asian hedge funds
Finance and Financial Management
TEO, Melvyn
Hedge Fund Return Correlation under Extreme Market Condition
description How dependent are returns across hedge fund investment strategies? We estimate the probability that each investment strategy performs poorly when other investment strategies are delivering extreme negative returns. Under extreme market conditions, we find that event driven, distressed debt, and equity long/short funds exhibit the highest correlation with other styles while commodity trading advisors, macro, and equity market neutral funds exhibit the lowest correlation. In addition, we show that Asia-focused event driven and equity market neutral funds provide diversification for investors holding US- and Europe-focused funds.
format text
author TEO, Melvyn
author_facet TEO, Melvyn
author_sort TEO, Melvyn
title Hedge Fund Return Correlation under Extreme Market Condition
title_short Hedge Fund Return Correlation under Extreme Market Condition
title_full Hedge Fund Return Correlation under Extreme Market Condition
title_fullStr Hedge Fund Return Correlation under Extreme Market Condition
title_full_unstemmed Hedge Fund Return Correlation under Extreme Market Condition
title_sort hedge fund return correlation under extreme market condition
publisher Institutional Knowledge at Singapore Management University
publishDate 2012
url https://ink.library.smu.edu.sg/bnp_research/28
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1025&context=bnp_research
_version_ 1681132764988964864

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