Evaluating Gains from Diversifying into Hedge Funds Using Dynamic Investment Strategies

28 Pages Posted: 16 Jun 2003  

Niclas Hagelin

Nordea Bank, Nordea Markets

Bengt Pramborg

Swedbank

Multiple version iconThere are 2 versions of this paper

Date Written: March 18, 2003

Abstract

In this study, we examine the returns and investment policies for portfolios of stocks and bonds with and without hedge funds. We apply the discrete-time dynamic investment model that allows for all moments of the return distribution to affect the analysis. This is of importance given that earlier studies have documented that hedge fund returns tend to be non-normally distributed. Our principal findings are (1) the gains from adding hedge funds to portfolios of stocks and bonds are statistically significant for most of the strategies investigated, (2) hedge funds enter the risk neutral portfolio as well as the most risk-averse portfolio, and (3) allocations to hedge funds are extensive at times.

Suggested Citation

Hagelin, Niclas and Pramborg, Bengt, Evaluating Gains from Diversifying into Hedge Funds Using Dynamic Investment Strategies (March 18, 2003). EFMA 2003 Helsinki Meetings. Available at SSRN: https://ssrn.com/abstract=407702 or http://dx.doi.org/10.2139/ssrn.407702

Niclas Hagelin

Nordea Bank, Nordea Markets ( email )

Hamngatan 10
Stockholm, SE-105 71
Sweden

Bengt Pramborg (Contact Author)

Swedbank ( email )

SE-105 34 Stockholm
Sweden

Paper statistics

Downloads
607
Rank
34,601
Abstract Views
3,035