Abstract

http://ssrn.com/abstract=1639984
 
 

References (19)



 
 

Citations (8)



 
 

Footnotes (10)



 


 



When There is No Place to Hide - Correlation Risk and the Cross-Section of Hedge Fund Returns


Andrea Buraschi


The University of Chicago; Imperial College Business School; Centre for Economic Policy Research (CEPR)

Robert Kosowski


Imperial College Business School; University of Oxford, Oxford-Man Institute of Quantitative Finance

Fabio Trojani


Swiss Finance Institute; University of Lugano

August 2013


Abstract:     
Using a novel dataset on correlation swaps, we study the relation between correlation risk, hedge fund characteristics and their risk-return profile. We find that hedge funds' ability to create market neutral returns is often associated with a significant exposure to correlation risk, which helps to explain the large abnormal returns found in previous models. We also estimate a significant negative market price of correlation risk, which accounts for the cross-section of hedge fund excess returns. Finally, we detect a pronounced nonlinear relation between correlation risk exposure and the tail risk of hedge fund returns.

Number of Pages in PDF File: 80

Keywords: Stochastic Correlation and Volatility, Hedge Fund Performance, Optimal Portfolio Choice

JEL Classification: D9, E3, E4, G11, G14, G23

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Date posted: July 15, 2010 ; Last revised: November 16, 2013

Suggested Citation

Buraschi, Andrea and Kosowski, Robert and Trojani, Fabio, When There is No Place to Hide - Correlation Risk and the Cross-Section of Hedge Fund Returns (August 2013). Available at SSRN: http://ssrn.com/abstract=1639984 or http://dx.doi.org/10.2139/ssrn.1639984

Contact Information

Andrea Buraschi
The University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
7738347123 (Phone)
HOME PAGE: http://www.andreaburaschi.com/

Chicago Booth School of Business Logo

Imperial College Business School ( email )
South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
HOME PAGE: http://www.andreaburaschi.com/
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Robert Kosowski (Contact Author)
Imperial College Business School ( email )
South Kensington Campus
Exhibition Road
London SW7 2AZ, DC SW7 2AZ
United Kingdom
+442075943294 (Phone)
HOME PAGE: http://www3.imperial.ac.uk/people/r.kosowski
University of Oxford, Oxford-Man Institute of Quantitative Finance ( email )
Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom
Fabio Trojani
Swiss Finance Institute ( email )
Via G. Buffi 13
Lugano, CH-6900
Switzerland
HOME PAGE: http://www.people.lu.unisi.ch/trojanif
University of Lugano ( email )
Faculty of Economics
Via Buffi 13
Lugano, 6900
Switzerland
HOME PAGE: http://www.people.lu.unisi.ch/trojanif
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References:  19
Citations:  8
Footnotes:  10

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