RT Journal Article
SR Electronic
T1 A Study of Dynamic Market Strategies of Hedge Funds Using the Kalman Filter
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 94
OP 106
DO 10.3905/jwm.2007.698898
VO 10
IS 3
A1 François-Éric Racicot
A1 Raymond Théoret
YR 2007
UL https://pm-research.com/content/10/3/94.abstract
AB The authors consider the dynamic market strategies of hedgefunds by using the Kalman filter. There are many studies onthe behavior of conditional alphas and betas of hedge funds,but the dynamics of these coefficients is studied within thetraditional regression framework: The resulting conditionalalphas and betas are hence for a great part arbitrary becausethey do not result from a dynamic optimization process. Inthis article, the authors try to correct this problem in partby writing transition equations for the alpha and the betawhose explanatory variables are market financial variables.The alphas of hedge fund indices appear quite difficult tocontrol, a result in line with the market efficiency hypoth-esis. Besides, the betas are much more controlable, their reac-tion to market variables being significant.TOPICS: Real assets/alternative investments/private equity, statistical methods, performance measurement