Regime switching models of hedge fund returns
Szabolcs Blazsek and
No 12/08, Faculty Working Papers from School of Economics and Business Administration, University of Navarra
We estimate and compare the forecasting performance of several dynamic models of returns of different hedge fund strategies. The conditional mean of return is an ARMA process while its conditional volatility is modeled according to the GARCH specification. In order to take into account the high level of risk of these strategies, we also consider a Markov switching structure of the parameters in both equations to capture jumps. Finally, the one-step-ahead out-of-sample forecast performance of different models is compared.
Keywords: Markov switching ARMA-GARCH; forecasting performance (search for similar items in EconPapers)
JEL-codes: C13 C15 G32 (search for similar items in EconPapers)
Pages: 52 pages
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:una:unccee:wp1208
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