Caught by the Tail: Tail Risk Neutrality and Hedge Fund Returns
Stephen J. Brown
New York University - Stern School of Business
Jonathan F. Spitzer
University of Virginia - Darden School of Business
May 19, 2006
We propose a simple and yet robust measure of tail neutrality. By this measure, hedge funds are more sensitive to market risk when the market experiences a substantial decline. This is also true when we consider a number of distinct hedge fund styles. This source of risk is not diversifiable, and for this reason funds-of-funds as portfolios of hedge funds concentrate tail risk exposure rather than mitigate this effect.
Number of Pages in PDF File: 40
Keywords: Hedge funds, Tail Risk, Funds of Fundsworking papers series
Date posted: May 27, 2011
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