Hedge fund strategies in the post-crisis era

Atılgan, Yiğit and Bali, Turan G. and Günaydın, A. Doruk (2021) Hedge fund strategies in the post-crisis era. In: Cumming, Douglas and Johan, Sofia and Wood, Geoffrey, (eds.) The Oxford Handbook of Hedge Funds. Oxford University Press, pp. 136-159. ISBN 9780198840954 (Print) 9780191876554 (Online)

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This chapter examines the performances of various hedge fund strategies based on various reward-to-risk ratios after the 2008 global crisis. We document that a majority of hedge fund strategies deliver lower average returns compared to equities and bonds; yet the volatilities of their returns have also been low. The equity hedge strategy has the highest reward-to-risk ratios among the major strategy categories, whereas the relative value arbitrage strategy has the lowest. Technology/healthcare, merger arbitrage, discretionary thematic, and asset-backed arbitrage strategies tend to have the highest reward-to-risk ratios in their respective categories. Time-series regressions of hedge fund strategy returns on various fund pricing factors provide evidence that hedge funds, on average, do not generate abnormal returns once the pricing factors are controlled for. We also document that hedge fund strategy returns generally load negatively on the bond market and aggregate credit risk factors and positively on the market portfolio.
Item Type: Book Section / Chapter
Uncontrolled Keywords: Credit risk; Factor models; Hedge funds; Investment companies; Performance measurement
Divisions: Sabancı Business School
Depositing User: Yiğit Atılgan
Date Deposited: 21 Aug 2022 13:18
Last Modified: 21 Aug 2022 13:18
URI: https://research.sabanciuniv.edu/id/eprint/44244

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