Abstract

http://ssrn.com/abstract=869769
 
 

References (58)



 


 



Autocorrelation, Bias, and Fat Tails - Are Hedge Funds Really Attractive Investments?


Martin Eling


University of St. Gallen - Institute of Insurance Economics; University of Saint Gallen - School of Finance (SoF)


Derivatives Use, Trading & Regulation, Vol. 12, No. 1, pp. 28-47, 2006

Abstract:     
In the literature, hedge funds often are evaluated by Markowitz portfolio selection theory, under which hedge funds appear to be a remarkable opportunity, seeing as they are characterized by low correlations to stock and bond markets and therefore offer the chance of better portfolio diversification. However, this approach neglects three problems concerning the returns of this alternative type of investment. When comparing the returns of hedge funds to those of traditional investments, the former show a significant extent of autocorrelation, bias, and fat tails. When these problems are incorporated in a performance evaluation of hedge funds, this type of fund loses most of its attraction.

Number of Pages in PDF File: 27

Keywords: Hedge Funds, Alternative Investments, Performance Measurement

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Date posted: December 14, 2005  

Suggested Citation

Eling, Martin, Autocorrelation, Bias, and Fat Tails - Are Hedge Funds Really Attractive Investments?. Derivatives Use, Trading & Regulation, Vol. 12, No. 1, pp. 28-47, 2006. Available at SSRN: http://ssrn.com/abstract=869769

Contact Information

Martin Eling (Contact Author)
University of St. Gallen - Institute of Insurance Economics ( email )
Kirchlistrasse 2
St. Gallen, 9010
Switzerland
University of Saint Gallen - School of Finance (SoF) ( email )
Rosenbergstrasse 52
St.Gallen, CH-9000
Switzerland

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