Hedge Funds Clustered by Risk, Return and Correlation

Research output: Contribution to journalArticleResearchpeer-review

Abstract

New hedge funds emerge to satisfy high investor demand, but some hedge fund strategies fail to deliver unique return and risk characteristics. Using K means++ clustering and principal component analysis, we find that we can capture the risk profiles of the existing funds with nine clusters. Moreover, we find that some funds deliver risk/return profiles that are not distinct from that of the index. Our results suggest that investors must consider carefully whether a hedge fund can deliver return and diversification benefits befitting its expenses
Original languageEnglish
JournalAcademy of Taiwan Business Management Review
Volume14
Issue number1
Publication statusPublished - 1 Jun 2018

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Risk and return
Hedge funds
Investors
Diversification benefits
Risk characteristics
Expenses
K-means clustering
Principal component analysis
Risk-return

Cite this

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abstract = "New hedge funds emerge to satisfy high investor demand, but some hedge fund strategies fail to deliver unique return and risk characteristics. Using K means++ clustering and principal component analysis, we find that we can capture the risk profiles of the existing funds with nine clusters. Moreover, we find that some funds deliver risk/return profiles that are not distinct from that of the index. Our results suggest that investors must consider carefully whether a hedge fund can deliver return and diversification benefits befitting its expenses",
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Hedge Funds Clustered by Risk, Return and Correlation. / Henker, Julia; Henker, Thomas.

In: Academy of Taiwan Business Management Review, Vol. 14, No. 1, 01.06.2018.

Research output: Contribution to journalArticleResearchpeer-review

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