Publication Type

Journal Article

Version

Publisher’s Version

Publication Date

3-2012

Abstract

How dependent are returns across hedge fund investment strategies? We estimate the probability that each investment strategy performs poorly when other investment strategies are delivering extreme negative returns. Under extreme market conditions, we find that event driven, distressed debt, and equity long/short funds exhibit the highest correlation with other styles while commodity trading advisors, macro, and equity market neutral funds exhibit the lowest correlation. In addition, we show that Asia-focused event driven and equity market neutral funds provide diversification for investors holding US- and Europe-focused funds.

Keywords

hedge funds, correlation, investment strategies, Asian hedge funds

Discipline

Finance and Financial Management

Publication

Hedge Fund Insights

First Page

2-8

Publisher

BNP Paribus Hedge Fund Centre, Singapore Management University

City or Country

Singapore

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