Abstract

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Send in the Clones? Hedge Fund Replication Using Futures Contracts


Nicolas P. B. Bollen


Vanderbilt University - Finance

Gregg S. Fisher


Gerstein Fisher

July 3, 2012

Vanderbilt Owen Graduate School of Management Research Paper No. 2102593

Abstract:     
Replication products strive to offer investors some of the benefits of hedge funds while avoiding their high fees, illiquidity, and opacity. We test whether a replication algorithm can deliver the diversification and high Sharpe ratio that investors seek. Our procedure constructs monthly clone returns out-of-sample using fully collateralized futures positions held for one-month, with position sizes determined using rolling window regressions. Clone returns have high correlation with their hedge fund targets, indicating replication is possible. Clones also have high correlation with a buy-and-hold investment in stocks, however, and neither the targets nor their clones demonstrate successful time variation in factor loadings.

Number of Pages in PDF File: 35

Keywords: Hedge fund, replication, market timing

JEL Classification: G23

working papers series


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Date posted: July 10, 2012 ; Last revised: March 22, 2013

Suggested Citation

Bollen, Nicolas P. B. and Fisher, Gregg S., Send in the Clones? Hedge Fund Replication Using Futures Contracts (July 3, 2012). Vanderbilt Owen Graduate School of Management Research Paper No. 2102593. Available at SSRN: http://ssrn.com/abstract=2102593 or http://dx.doi.org/10.2139/ssrn.2102593

Contact Information

Nicolas P.B. Bollen (Contact Author)
Vanderbilt University - Finance ( email )
401 21st Avenue South
Nashville, TN 37203
United States
HOME PAGE: http://mba.vanderbilt.edu/faculty/nbollen.cfm

Gregg S. Fisher
Gerstein Fisher ( email )
565 Fifth Avenue
27th Floor
New York, NY 10017
United States
212-968-0707 (Phone)
HOME PAGE: http://www.gersteinfisher.com
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