Hedge Fund Returns under Crisis Scenarios: A Holistic Approach

27 Pages Posted: 26 Oct 2018

See all articles by Chrysostomos Stoforos

Chrysostomos Stoforos

Panteion University of Athens - Panteion University of Political and Social Sciences

Stavros Antonios Degiannakis

Department of Economic and Regional Development, Panteion University of Political and Social Sciences

Theodosios Palaskas

Panteion University of Athens - Panteion University of Political and Social Sciences

Date Written: October 2016

Abstract

The assets of the hedge fund industry are nearly equivalent to the GDP of the UK. The industry, which claims returns independent of markets conditions and has been blamed for economic crises, has attracted the interest of a wide range of financial and political players and academics. This paper, using monthly series performance data since January 1995, at a fund strategy level and S&P500, and a holistic and a developed dynamic correlation quantitative approach, aims to challenge the allegations and the claims, which have been made on rather incomplete research grounds. Statistically, the results strongly reject the claims of the vast majority of fund strategies, excluding the case of the macro and short strategies, over the crisis periods, suggesting that they cannot protect their investors like S&P500. Regarding the allegations, it is inferred that Hedge Funds are used in most cases as a scapegoat rather than actually being the cause of the crises.

Keywords: Absolute Returns, Carhart’s Model, Dynamic Conditional Correlation, Financial Crisis, Hedge Funds, Structural Breaks

JEL Classification: GO1, G11, G23

Suggested Citation

Stoforos, Chrysostomos and Degiannakis, Stavros Antonios and Palaskas, Theodosios, Hedge Fund Returns under Crisis Scenarios: A Holistic Approach (October 2016). Available at SSRN: https://ssrn.com/abstract=3259857 or http://dx.doi.org/10.2139/ssrn.3259857

Chrysostomos Stoforos

Panteion University of Athens - Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

Stavros Antonios Degiannakis (Contact Author)

Department of Economic and Regional Development, Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

Theodosios Palaskas

Panteion University of Athens - Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

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