Asset-Based Style Factors for Hedge Funds

Posted: 20 Mar 2003

See all articles by David A. Hsieh

David A. Hsieh

Duke University - Fuqua School of Business; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

William Fung

PI Asset Management, LLC

Abstract

Asset-based style factors link returns of hedge fund strategies to observed market prices. They provide explicit and unambiguous descriptions of hedge fund strategies that reveal the nature and quantity of risk. Asset-based style factors are key inputs for portfolio construction and for benchmarking hedge fund performance on a risk-adjusted basis. We used previously developed models to construct asset-based style factors and demonstrate that one model correctly predicted the return behavior of trend-following strategies during out-of-sample periods - in particular, during stressful market conditions like those of September 2001.

Keywords: Alternative Investments, hedge funds

Suggested Citation

Hsieh, David Arthur and Fung, William (Bill), Asset-Based Style Factors for Hedge Funds. Available at SSRN: https://ssrn.com/abstract=377320

David Arthur Hsieh (Contact Author)

Duke University - Fuqua School of Business ( email )

Department of Finance
Box 90120
Durham, NC 27708-0120
United States
919-660-7779 (Phone)
919-660-7961 (Fax)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

William (Bill) Fung

PI Asset Management, LLC ( email )

79 Wellington Street West
Suite 3500
Toronto, Ontario M5K 1K7
Canada

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