Abstract

http://ssrn.com/abstract=974421
 
 

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Hedge Fund Investment Through Piecewise Linear Regression and Optimization


Fei Pan


Purdue University - Krannert School of Management

Bo Zeng


Purdue University

September 8, 2007


Abstract:     
It is conjectured that the size of a hedge fund has some impact on its return. In this paper, we investigate the relationship between them and apply the results to construct an investment model. We first implement a learning algorithm to construct a piecewise linear regression model which shows that a fund's AUM (Asset Under Management) has different effects in different situations on its return. Then, with consideration of the various scenarios, we propose a robust optimization model to maximize the expected profit. Finally, we present the computational results that illustrate the strength of our two-stage procedure.

Number of Pages in PDF File: 15

Keywords: hedge fund, piecewise linear regression, portfolio optimization

JEL Classification: C44, C45

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Date posted: March 27, 2007  

Suggested Citation

Pan, Fei and Zeng, Bo, Hedge Fund Investment Through Piecewise Linear Regression and Optimization (September 8, 2007). Available at SSRN: http://ssrn.com/abstract=974421 or http://dx.doi.org/10.2139/ssrn.974421

Contact Information

Fei Pan
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
HOME PAGE: http://panfei.googlepages.com
Bo Zeng (Contact Author)
Purdue University ( email )
610 Purdue Mall
West Lafayette, IN 47907
United States
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