Journal article
Hedge Fund Replication: A Model Combination Approach
Review of Finance, Vol.21(4), pp.1767-1804
07/01/2017
DOI: 10.1093/rof/rfw037
Abstract
Recent years have seen increased demand from institutional investors for passive replication products that track the performance of hedge fund strategies using liquid investable assets such as futures contracts. In practice, linear replication methods suffer from poor tracking performance and high turnover. We propose a model combination approach to index replication that pools information from a diverse set of pre-specified factor models. Compared with existing methods, the pooled clone strategies yield consistently lower tracking errors, generate less severe portfolio drawdowns, and require substantially smaller trading volume. The pooled hedge fund clones also provide economic benefits in a portfolio allocation context.
Details
- Title: Subtitle
- Hedge Fund Replication: A Model Combination Approach
- Creators
- Michael S. O’DohertyN. E. Savin - University of IowaAshish Tiwari - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Review of Finance, Vol.21(4), pp.1767-1804
- DOI
- 10.1093/rof/rfw037
- ISSN
- 1572-3097
- eISSN
- 1875-824X
- Language
- English
- Date published
- 07/01/2017
- Academic Unit
- Economics; Finance
- Record Identifier
- 9984380387002771
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