第十四届亚太财务经济及会计会议暨.ppt

HedgeFundMarketNeutralStrategies DistinguishingFinancialandOperationalRiskFactors StephenJ BrownNYUStern TheJoint14thAnnualPBFEAand2006AnnualFeATConference第十四屆亞太財務經濟及會計會議暨2006台灣財務工程學會聯合研討會 Distinguishingoperationalandfinancialrisk HistoricalperspectiveOperationalriskCharacterizedbyconflictsofinterestFinancialriskThemythofmarketneutralityRobustmeasureoftailriskneutralityConclusion TheHistoryofHedgeFunds Thefirsthedgefund AlfredWinslowJones 1949 LimitedPartnership exemptfrom 40Act Long shortstrategy20 ofprofit nofixedfeeUsedshortpositionsandleverage HedgeFund Fortunemagazine1966 TigerFund InstitutionalInvestor1986 GeorgeSoros 3 2BillionraidontheERM 1992 CalPERS 2000 Institutionalconcernaboutrisk FiduciaryguidelinesimplyconcernforriskFinancialriskOperationalriskInstitutionaldemandGrowingpopularityofmarketneutralstylesExplosivegrowthoffundsoffundsDemandfor marketneutral fundsoffunds OperationalRisk Source TremontTASS Europe Limited Hedgefundfailureishighlypredictable Measuringoperationalrisk SECregistrationrequirement Feb2006 2270ofTASSFundsthatregisteredHadbetterpastperformanceHadlargerassetsundermanagement15 8 hadpriorlegal regulatoryproblemsWhatarethecorrelatesofoperationalrisk Correlatesofoperationalrisk Externalconflicts Internalconflicts Towardsaunivariateindexofoperationalrisk FinancialRisk Source EltonandGruber1995 Riskismeasuredrelativetothestandarddeviationoftheaveragestock FinancialRisk Caughtbythetail S P500returnsatTreasuryBillrisk Mostnewfundsclaimtobe marketneutral ZerocorrelationwithbenchmarkZerocorrelationisnotastrategyZerocorrelationisanoutcomeofastrategyThesestrategiesfailinliquiditycrisesRiskisconsiderablyunderstatedNewconcept tailriskneutrality Amarketneutralstrategy Data TASShedgefunds bothdeadandaliveUSfundswithatleast10returns averageof40maxof120 Notalotofdataperfund butplentywhentheuniverseiscombined nearly50 000fund monthobservations Anexampleof marketneutrality FundReturns MarketReturns 0 2 0 2 0 4 0 6 0 8 0 6 0 8 0 4 1 5 1 1 0 8 0 4 Beta 28 rho 24 AssumingMVNreturns 2 5 1 9 1 3 0 6 FundReturns 0 2 0 4 0 6 0 8 S P500Returns 0 2 0 6 0 8 0 4 Beta 28 rho 24 Marketneutralityinthe realworld UsingTASSdata 2 5 1 9 1 3 0 6 FundReturns 0 2 0 4 0 6 0 8 S P500Returns 0 2 0 6 0 8 0 4 Beta 28 rho 24 Marketneutralityinthe realworld LongShortEquityFunds 2 9 2 2 1 3 0 6 FundReturns 0 2 0 4 0 6 0 8 S P500Returns 0 2 0 6 0 8 0 4 Beta 50 rho 37 Eventdrivenstyle 3 1 2 3 1 5 0 8 FundReturns 0 2 0 4 0 6 0 8 S P500Returns 0 2 0 6 0 8 0 4 Beta 20 rho 23 DedicatedShortSellers 4 5 3 4 2 3 1 1 FundReturns 0 2 0 4 0 6 0 8 S P500Returns 0 2 0 6 0 8 0 4 Beta 91 rho 61 Fixedincomearbitrage 1 5 1 1 0 8 0 4 FundReturns 0 2 0 4 0 6 0 8 S P500Returns 0 2 0 6 0 8 0 4 Beta 0 01 rho 0 02 FundsofHedgeFunds FundsofHedgeFunds Provides FundsofHedgeFunds ProvidesDiversification lowervalueatrisk FundsofHedgeFunds ProvidesDiversification lowervalueatriskSmallerunitsizeofinvestment FundsofHedgeFunds ProvidesDiversification lowervalueatriskSmallerunitsizeofinvestmentProfessionalmanagement Duediligence FundsofHedgeFunds ProvidesDiversification lowervalueatriskSmallerunitsizeofinvestmentProfessionalmanagement DuediligenceAccesstootherwiseclosedfunds InstitutionsloveFoF SpectaculargrowthofFundsofFunds2000 15 ofallHedgefundswereFoF2003 18 ofallHedgefundswereFoF2005 27 ofallHedgefundswereFoFInstitutionalattractionofFundsofFundsRiskmanagementDuediligence FundsofFunds 2 9 2 2 1 3 0 6 FundReturns 0 2 0 4 0 6 0 8 S P500Returns 0 2 0 6 0 8 0 4 Beta 14 rho 22 RelationshiptoLIBOR 1 0 0 8 0 5 0 3 FundReturns 0 2 0 4 0 6 0 8 LIBORreturn 0 2 0 6 0 8 0 4 Beta 0 0 rho 0 0 Fixedincomearbitrage 2 0 1 5 1 0 0 5 FundReturns 0 2 0 4 0 6 0 8 LIBORreturn 0 2 0 6 0 8 0 4 Beta 02 rho 05 Simplemeasuresoftailriskexposure IndependenceanunrealisticbenchmarkConsiderMVNormalwiththesamesamplecorrelationMVStudentwith3df Simplemeasuresoftailriskexposure IndependenceanunrealisticbenchmarkConsiderMVNormalwiththesamesamplecorrelationMVStudentwith3df 0 24 0 0188 Anexampleof marketneutrality FundReturns MarketReturns 0 2 0 2 0 4 0 6 0 8 0 6 0 8 0 4 1 5 1 1 0 8 0 4 Beta 28 rho 24 AssumingMVNreturns Anexampleof marketneutrality FundReturns MarketReturns 0 2 0 2 0 4 0 6 0 8 0 6 0 8 0 4 1 5 1 1 0 8 0 4 Beta 28 rho 24 WW LW WL LL LLshouldbe1 88 ofsampleassumingMVNreturns ComparisonwithS P500Benchmark ComparisonwithLIBORBenchmark LogitSpecification Boyson StahelandStulz 2006 suggestrunninglogitregressionsofwhetherafundindexcrashesinamonthuponthemarketreturnandadummyformarketcrashes Apositivecoefficientonthedummyindicatesadditionaldependenceduringcrashes Lackspowerwhenrunonasingleindex Weruntheregres