Hedge fund portfolio selection with fund characteristics |
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Author: | Joenväärä, Juha1; Kauppila, Mikko2; Kahra, Hannu2 |
Organizations: |
1Aalto University, P.O. Box 11000, FI-00076 Aalto, Espoo, Finland 2Oulu Business School, University of Oulu, P.O. Box 4600, FI-90014, Oulu, Finland |
Format: | article |
Version: | published version |
Access: | open |
Online Access: | PDF Full Text (PDF, 1.2 MB) |
Persistent link: | http://urn.fi/urn:nbn:fi-fe2022030822361 |
Language: | English |
Published: |
Elsevier,
2021
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Publish Date: | 2022-03-08 |
Description: |
AbstractThis paper examines hedge fund portfolio selection approaches in isolation and in the context of an investor’s overall portfolio. Characteristics-based portfolios that minimize risk delivers superior out-of-sample performance. For instance, a minimum variance portfolio tilting toward small funds with high alpha and strategy distinctiveness index and low systematic risk delivers an annualized Sharpe ratio of 2.03 with a maximum drawdown of 5.20%. Investors realize diversification benefits by shifting a portion of their wealth from 60 to 40 equity-bond portfolio to characteristics-based hedge fund portfolio. Investors recognize the attractiveness of characteristics-based portfolios, but do not target flows enough to erode their superior performance. see all
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Series: |
Journal of banking & finance |
ISSN: | 0378-4266 |
ISSN-E: | 1872-6372 |
ISSN-L: | 0378-4266 |
Volume: | 132 |
Article number: | 106232 |
DOI: | 10.1016/j.jbankfin.2021.106232 |
OADOI: | https://oadoi.org/10.1016/j.jbankfin.2021.106232 |
Type of Publication: |
A1 Journal article – refereed |
Field of Science: |
512 Business and management |
Subjects: | |
Copyright information: |
© 2021 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license ( http://creativecommons.org/licenses/by/4.0/ ) |
https://creativecommons.org/licenses/by/4.0/ |