Alpha Characteristics of Hedge Funds
American Realty Capital; UBS; Massachusetts Institute of Technology (MIT); Harvard University
December 19, 2011
Hedge Fund (HF) managers are expected to create excess investment returns (Alpha) through two primary skills based sources: (i) Security selection: buying undervalued securities and selling overvalued securities. (ii) Market timing: entering markets in advance of, or when they are rising and exiting, or shorting them when they are declining. In this paper we employ a Kalman Filtering approach to measure the skills based component of HF returns. We separately quantify value generated through market timing and security selection decisions over various market regimes and detail the characteristics of HF Alpha.
Number of Pages in PDF File: 16
Keywords: Hedge Funds, alpha,market timing, security selectionworking papers series
Date posted: March 2, 2012 ; Last revised: May 28, 2013
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.406 seconds