A Multi-Criteria Financial and Energy Portfolio Analysis of Hedge Fund Strategies

David Allen, Michael McAleer and Abhay K. Singh
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Abhay K. Singh: Department of Applied Finance, Macquarie University, Australia.

No 2018-18, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: The paper is concerned with a multi-criteria portfolio analysis of hedge fund strategies that are concerned with financial commodities, including the possibility of energy spot, futures and exchange traded funds (ETF). It features a tri-criteria analysis of the Eurekahedge fund data strategy index data. We use nine Eurekahedge equally weighted main strategy indices for the portfolio analysis. The tri-criteria analysis features three objectives: return, risk and dispersion of risk objectives in a Multi-Criteria Optimisation (MCO) portfolio analysis. We vary the MCO return and risk targets, and contrast the results with four more standard portfolio optimisation criteria, namely tangency portfolio (MSR), most diversified portfolio (MDP), global minimum variance portfolio (GMW), and portfolios based on minimising expected shortfall (ERC). Backtests of the chosen portfolios for this hedge fund data set indicate that the use of MCO is accompanied by uncertainty about the a priori choice of optimal parameter settings for the decision criteria. The empirical results do not appear to outperform more standard bi-criteria portfolio analyses in the backtests undertaken on the hedge fund index data.

Keywords: MCO; Portfolio Analysis; Hedge Fund Strategies; Multi-Criteria Optimisation; Genetic Algorithms; Spot prices; Futures pricees; Exchange Traded Funds (ETF). (search for similar items in EconPapers)
JEL-codes: C58 D53 G15 G17 G32 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2018-06
New Economics Papers: this item is included in nep-rmg and nep-sea
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