Publication Type
Magazine Article
Version
Publisher’s Version
Publication Date
12-2008
Abstract
Many investors, expecting absolute returns, were shocked by the dismal performance of various hedge fund investment strategies in 2008. In this issue of the statistical digest, I review the academic literature on hedge fund risks and conduct some simple analyses. I find that many hedge funds, even those without directional equity exposure, have payoffs that resemble those from writing put options on equity indices. A central theme is that their strategies all involve being short liquidity. Therefore, these hedge funds tend to underperform during liquidity crises, which coincide with extreme bear markets.
Keywords
Hedge funds, hedge fund risks, hedge fund returns, hedge fund performance
Discipline
Finance and Financial Management
Research Areas
Finance
Areas of Excellence
Finance and Financial Markets
Publication
Hedge Fund Insights: Statistical Digest of the BNP Paribus Hedge Fund Centre at SMU
First Page
1
Last Page
11
Publisher
BNP Paribus Hedge Fund Centre, Singapore Management University
City or Country
Singapore
Citation
Teo, Melvyn. 2008 December. How Surprising are Returns in 2008? A Review of Hedge Fund Risks. Hedge Fund Insights: Statistical Digest of the BNP Paribus Hedge Fund Centre at SMU, 1-11.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Listed as Hedge Fund Insights on BNP Paribus Hedge Fund Centre website http://hfc.smu.edu.sg/research/