Linear Model for Passive Hedge Fund Replication

Giovanni Barone-Adesi and Simone Siragusa

Chapter 10 in Hedge Fund Replication, 2012, pp 133-145 from Palgrave Macmillan

Abstract: Abstract Considerable academic research has been conducted on the effectiveness of hedge fund replication methods. In the last five years hedge fund replication products have become part of investment banking. Funds or structured products whose aim is to replicate the returns of hedge funds1 are offered by banks such as Goldman Sachs and Merrill Lynch. Their success is due to two main reasons (1) the low interest rate experienced in developed countries in the last decade and (2) the growing difficulty for hedge funds to produce higher returns when risk premia are driven down by huge flows of private and institutional capital.

Keywords: Tracking Error; Hedge Fund; Sharpe Ratio; Mean Absolute Deviation; Best Linear Unbiased Estimator (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1057/9780230358317_10

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