Abstract

http://ssrn.com/abstract=1035521
 
 

References (23)



 
 

Citations (9)



 


 



An Alternative Approach to Alternative Beta


Thierry Roncalli


Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE); Lyxor Asset Management

Jerome Teiletche


Unigestion

April 1, 2007


Abstract:     
Hedge fund replication based on factor models is encountering growing interest. In this paper, we investigate the implications of substituting standard rolling windows regressions, which appear ad-hoc, with more efficient methodologies like the Kalman Filter. We show that the copycats constructed this way offer risk-return profiles which share several characteristics with the ones posted by hedge funds indices: Sharpe ratios above buy-and-hold strategies on standard assets, moderate correlation with standard assets and limited drawdowns during equity downward trends. An interesting result is that the shortfall risk seems less important than with hedge fund indices and regressions based-trackers. We finally propose new breakdowns of hedge fund performance into alpha, traditional beta and alternative beta.

Number of Pages in PDF File: 17

Keywords: Hedge funds, factor models, beta, alpha, replication, Kalman filter

JEL Classification: G00


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Date posted: November 30, 2007  

Suggested Citation

Roncalli, Thierry and Teiletche, Jerome, An Alternative Approach to Alternative Beta (April 1, 2007). Available at SSRN: http://ssrn.com/abstract=1035521 or http://dx.doi.org/10.2139/ssrn.1035521

Contact Information

Thierry Roncalli (Contact Author)
Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE) ( email )
Boulevard Francois Mitterrand
F-91025 Evry Cedex
France
Lyxor Asset Management ( email )
Paris
France
Jerome Teiletche
Unigestion ( email )
8c, avenue de Champel CP 387
CP 387
Genève 12, CH 1211
Switzerland
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