The (Mis)Behavior of Hedge Fund Strategies: A Network-Based Analysis

Posted: 22 Jun 2017

Date Written: June 22, 2017

Abstract

We discuss a network-based methodology that models hedge fund strategies across the superordinate-subordinate dimension to gain new insights into their interrelation. This methodology uncovers considerable misbehavior among various hedge fund strategies from the network perspective. Firstly, we conduct a static analysis demonstrating misbehaviors for the full-sample dataset. In addition, we perform dynamic bootstrapping analyses offering details on the misbehavior of selected hedge fund strategies. Finally, we demonstrate that numerous network-based behavioral properties of hedge funds strategies can explain current and future hedge fund returns. The last aspect is of significant relevance, as it shows that network-based information has the potential to act as a value-adding warning indicator for funds of hedge funds. Summing up, we think that this article provides novel and valuable tools for hedge fund investors, managers and analysts.

Keywords: Financial Networks, Minimum Spanning Tree, Bootstrapping, Hedge Funds, Forecasting, Graphical Analysis

JEL Classification: D85, C22, G17, C53

Suggested Citation

Baitinger, Eduard and Maier, Thomas, The (Mis)Behavior of Hedge Fund Strategies: A Network-Based Analysis (June 22, 2017). Available at SSRN: https://ssrn.com/abstract=2990968 or http://dx.doi.org/10.2139/ssrn.2990968

Eduard Baitinger (Contact Author)

FERI Trust GmbH ( email )

Rathausplatz 8-10
Bad Homburg v.d.H, 61348
Germany

Thomas Maier

FERI Trust GmbH ( email )

Rathausplatz 8-10
Bad Homburg v.d.H, 61348
Germany

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