Hedge fund predictability and optimal asset allocation
Ekaterini Panopoulou (),
Theologos Pantelidis () and
Spyridon Vrontos ()
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Spyridon Vrontos: University of Essex
No 3105383, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences
The degree of both return and volatility hedge fund predictability is revealed using a regime switching framework. Optimal combinations of regime switching model forecasts allow us to capture the stylized facts of hedge fund returns and construct superior hedge fund return forecasts in the presence of parameter instability and model uncertainty. Our dataset consists of individual hedge fund data from the Barclays hedge fund database for the period January 1994 to December 2013. Our extensive set of predictors contains the Fung and Hsieh factors, factors related to style investing and to investment policies, macro related / business indicators variables and market-oriented factors. The economic value of the proposed predictability models is investigated by studying its effects on asset allocation and active portfolio management.
Keywords: Hedge fund predictability; regime switching model; asset allocation (search for similar items in EconPapers)
JEL-codes: C53 G11 (search for similar items in EconPapers)
Pages: 1 page
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Published in Proceedings of the Proceedings of the 20th International Academic Conference, Madrid, Nov 2015, pages 348-348
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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:3105383
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