Risk Factors and Portfolio Choice in the Context of Hedge Fund Investing

A special issue of Risks (ISSN 2227-9091).

Deadline for manuscript submissions: closed (1 February 2014) | Viewed by 13836

Special Issue Editor


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Guest Editor
The Johns Hopkins Carey Business School 100 International Drive, Baltimore, MD 21202, USA
Interests: hedge funds; quant investing; capital market; finance

Special Issue Information

Dear Colleagues,

Hedge funds have been intensively employed by "sophisticated" investors over many years. Recently, we have seen a growing number of institutional investors taking the leap of faith and investing directly into hedge funds, thereby passing traditional routes of fund of funds and other hedge fund aggregation vehicles, such as replicators. Given the need to better understand the risks, both known and unknown with regards to investing in the vast array of possible hedge fund strategy, we attempt to highlight the current best practice methodologies in this domain. Our goal here is to better understand how to measure, monitor, and manage the many distinct dimension of risk when including hedge fund investments in traditional portfolios. In this volume we compile the best ideas and most controversial thoughts in regards to the current application of risks and portfolio choice in the context of hedge fund investing.

Dr. Jim Kyung-Soo Liew

Guest Editor

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Published Papers (2 papers)

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Research

630 KiB  
Article
Initial Investigations of Intra-Day News Flow of S&P500 Constituents
by Jim Kyung-Soo Liew and Zhechao Zhou
Risks 2014, 2(2), 89-102; https://doi.org/10.3390/risks2020089 - 1 Apr 2014
Viewed by 5843
Abstract
In this work, we examine Thomas Reuters News Analytics (TRNA) data. We found several fascinating discoveries. First, we document the phenomenon that we label “Jam-the-Close”: The last half hour of trading (15:30 to 16:00 EST) contains a substantial and statistically significant amount of [...] Read more.
In this work, we examine Thomas Reuters News Analytics (TRNA) data. We found several fascinating discoveries. First, we document the phenomenon that we label “Jam-the-Close”: The last half hour of trading (15:30 to 16:00 EST) contains a substantial and statistically significant amount of news sentiment releases. This finding is robust across years and months of the year. Next, upon further investigations we found that the “novelty” score is on average 0.67 in this period vs. 2.09 prior to midday. This indicates that “new” news is flowing at a rapid pace prior to the close. Finally, we discuss the implication of such phenomena in the context of existing financial literature. Full article
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656 KiB  
Article
U.S. Equity Mean-Reversion Examined
by Jim Liew and Ryan Roberts
Risks 2013, 1(3), 162-175; https://doi.org/10.3390/risks1030162 - 4 Dec 2013
Cited by 4 | Viewed by 7563
Abstract
In this paper we introduce an intra-sector dynamic trading strategy that captures mean-reversion opportunities across liquid U.S. stocks. Our strategy combines the Avellaneda and Lee methodology (AL; Quant. Financ. 2010, 10, 761–782) within the Black and Litterman framework (BL; J. Fixed [...] Read more.
In this paper we introduce an intra-sector dynamic trading strategy that captures mean-reversion opportunities across liquid U.S. stocks. Our strategy combines the Avellaneda and Lee methodology (AL; Quant. Financ. 2010, 10, 761–782) within the Black and Litterman framework (BL; J. Fixed Income, 1991, 1, 7–18; Financ. Anal. J. 1992, 48, 28–43). In particular, we incorporate the s-scores and the conditional mean returns from the Orstein and Ulhembeck (Phys. Rev. 1930, 36, 823–841) process into BL. We find that our combined strategy ALBL has generated a 45% increase in Sharpe Ratio when compared to the uncombined AL strategy over the period from January 2, 2001 to May 27, 2010. These new indices, built to capture dynamic trading strategies, will definitely be an interesting addition to the growing hedge fund index offerings. This paper introduces our first “focused-core” strategy, namely, U.S. Equity Mean-Reversion. Full article
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