Monthly Hedge Fund Performance (June to December 2013) Sagar Amlani - AlternativeSoft AG This report details top performing hedge funds by strategy, based on data provided in the Barclayhedge database. In the report, we screen Hedge Funds to those typically desired by large institutional investors with: a minimum track record of 36 months, a minimum of…Details
Bear correlation is the correlation between two marginal asset distributions during the first asset negative returns. Instead of computing a classical correlation between an asset and an index, it is better to compute the correlation during marginal asset distributions or conditional asset distributions. This will capture both assets non-normalities and codependence asymmetries. If the conditional…Details
The 4-Moment Capital Asset Pricing Model is based on two academic papers (Jurcenzko and Maillet, The Four Moment CAPM: Some Basic Results , working paper, 2002, and Hwang and Satchell, Modeling Emerging Market Risk Premia Using Higher Moments , working paper, 1999). When financial assets are normally distributed, the historical asset return, the asset standard…Details
The beta of the CAPM measures the linear market risk. The first to assign that the beta was not linear were G.Pettengill, S.Sundaram and I.Mathur, “The Conditional Relation Between Beta and Returns”, Journal of Financial and Quantitative Analysis , 1995. They showed that the beta of a stock is different depending if the market is…Details
A simulation gives a portfolio view for the future with some given probabilities. The investor must be aware of the probability to be below a given return in the next x years. The simulation below shows that the portfolio has 50% probability to be higher than 20.9% in 2 years.
The matrix M has some interesting properties. It is used when simulating a portfolio of assets. The Cholesky decomposition separates a matrix E in two identical matrices M: The matrix E is a matrix including the assets’ correlation.The matrix M is called Cholesky matrix. It is a lower triangular matrix. Multiplying the Cholesky matrix…Details
These two measures, developed in 2010, are mixing beta (i.e. relation between an asset and a benchmark) and skewness (i.e. how two assets are related between themselves during extreme negative returns of the first asset). Beta Coskewness measures how much an asset, within a portfolio, has historically reacted to extreme benchmark negative returns. An asset…Details
Questions Non-normal distribution models are used more and more in order to price financial assets. We provide some basic questions and their respective answers on non-normal distributions: (1) What is the distribution skewness when you see more returns on the left of the mean? a) Skewness>0 b) Skewness<0 c) Skewness=0 (2) What is the probability…Details