40 Pages Posted: 27 May 2011
Date Written: 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.
Keywords: Hedge funds, Tail Risk, Funds of Funds
Suggested Citation: Suggested Citation
Brown, Stephen J. and Spitzer, Jonathan F., Caught by the Tail: Tail Risk Neutrality and Hedge Fund Returns (May 19, 2006). Available at SSRN: https://ssrn.com/abstract=1852526 or http://dx.doi.org/10.2139/ssrn.1852526
By Bing Liang