Dynamic hedge fund portfolio construction

DSpace/Manakin Repository

Open Research Exeter (ORE)

Dynamic hedge fund portfolio construction

Please use this identifier to cite or link to this item: http://hdl.handle.net/10036/96440


Title: Dynamic hedge fund portfolio construction
Author: Harris, Richard D. F.
Mazibas, Murat
Publisher: University of Exeter Business School
Date Issued: 2009-11
URI: http://hdl.handle.net/10036/96440
Links: http://xfi.exeter.ac.uk/workingpapers/0907.pdf
Abstract: In this paper, we provide further evidence on the use of multivariate conditional volatility models in hedge fund risk measurement and portfolio allocation, using monthly hedge fund index return data for the period 1990 to 2009. Building on Giamouridis and Vrontos (2007), we consider a broad set of multivariate GARCH models as well as the simpler exponentially weighted moving average (EWMA) estimator of RiskMetrics (1996). We find that while multivariate GARCH models provide some improvement in portfolio performance over static models, they are generally dominated by the EWMA model. In particular, in addition to providing better risk-adjusted performance, the EWMA model leads to dynamic allocation strategies that have substantially lower turnover and could therefore be expected to involve lower transaction costs. Moreover, we show that these results are robust across low-volatility and high-volatility sub-periods.
Type: Working Paper
Description: Working paper
Keywords: hedge fund returnsfunds of fundsmultivariate conditional volatilityportfolio optimisation
ISSN: 1743-548X

Please note: Before reusing this item please check the rights under which it has been made available. Some items are restricted to non-commercial use. Please cite the published version where applicable.

Files in this item

Files Size Format View
0907.pdf 222.2Kb PDF Thumbnail

This item appears in the following Collection(s)


My Account

Local Links