Trapped in diversification – another look at the risk of fund of hedge funds

Recent literature implies that despite being more diversified, fund of hedge funds (FOFs) are exposed to tail risk. We propose an explanation for this phenomenon; tail risk is a systematic risk factor for hedge funds, which by construction, explains the higher portion of the returns in the diversified portfolios. Our study suggests that not only an additional tail risk factor improves the explanatory power of the factor model, the relative importance of tail risk factor increases with the number of underlying hedge funds in an FOF portfolio. Furthermore, we demonstrate that FOFs with a short history, higher management fees, leverage and requiring shorter lockup periods are more sensitive to tail risk.     

Conditional performance evaluation for German equity mutual funds

We investigate the conditional performance of a sample of German equity mutual funds over the period from 1994 to 2003 using both the beta-pricing approach and the stochastic discount factor (SDF) framework. On average, mutual funds cannot generate excess returns relative to their benchmark that are large enough to cover their total expenses. Compared to unconditional alphas, fund performance sharply deteriorates when we measure conditional alphas. Given that stock returns are to some extent predictable based on publicly available information, conditional performance evaluation raises the benchmark for active fund managers because it gives them no credit for exploiting readily available information. Underperformance is more pronounced in the SDF framework than in beta-pricing models. The fund performance measures derived from alternative model specifications differ depending on the number of primitive assets taken to calibrate the SDF as well as the number of instrument variables used to scale assets and/or factors.     

Convertible Bond Arbitrage: Risk and Return

Abstract:  This paper specifies a simulated convertible bond arbitrage portfolio to characterise the risks in convertible bond arbitrage. For comparison the risk profile of convertible bond arbitrage hedge fund indices at both monthly and daily frequencies is also examined. Results indicate that convertible bond arbitrage is positively related to default and term structure risk factors. These risk factors are augmented with the simulated convertible bond arbitrage portfolio, mimicking a passive investment in convertible bond arbitrage, to assess the risk and return of individual hedge funds. We provide estimates of the performance of two hedge fund indices (an equally weighted and value weighted index) and a sample of convertible bond arbitrage hedge funds using a factor model methodology. Lagged and contemporaneous observations of the risk factors are specified, controlling for illiquidity in the securities held by funds. Our results cover two time periods. Initially we find evidence of abnormal risk adjusted returns in the individual hedge fund data and the equally weighted hedge fund index and no evidence of abnormal risk adjusted returns in the value weighted hedge fund index. When we examine performance during the credit crisis of 2007 and 2008 we find evidence of negative abnormal returns amongst individual hedge funds and the hedge fund indices.     

A Simulation-Based Investigation of Errors in Accounting-Based Surrogates for Internal Rate of Return

Accounting-based measures of a firm's ex post performance represent accessible, albeit imperfect, surrogates for its internal rate of return (IRR). Using a cross-sectional data set obtained via computer simulation, this study calculated the error with which the accounting rate of return (ARR) and conditional estimate of internal rate of return (CIRR) estimate IRR. The study compared the error with which both surrogates measure IRR, as well as the ability of growth in unit demand (gD), inventory cost flow assumption (INV) and depreciation method (DEP) to explain the measurement error in both surrogates.     

On the Long Run Effects of Public Capital and Disaggregated Public Capital on Aggregate Output

We study the cointegration properties of data on aggregate output, five proxies for labor, two proxies for private capital, public capital, and disaggregated public capital for the United States for 1948–1993. We find evidence of multiple cointegrating vectors; we typically find three or four cointegrating vectors depending on which combination of proxies is evaluated. When public capital is disaggregated by type there is less evidence for cointegration. Finally, innovations in public capital have long lasting effects on output, labor, and private capital, and innovations to output, labor, and private capital also have long lasting effects on public capital.     

The Dynamic Impact of Macro Shocks on Insurance Premiums

We develop a model that investigates the relation between insurance premiums and macroeconomic variables, including oil price, interest rate, aggregate supply, and aggregate demand. We then use a multivariate structural vector error correction model to distinguish the effects arising from permanent and transitory components of insurance premiums. Changes in the transitory component indicate that our model captures key historical events. Although real shocks originating from oil price and aggregate supply explain the behavior of insurance premiums well, we show that financial market shocks are the main driving force behind the recent increasing volatility in insurance premiums in the U.S. market.

中国原油价格的外生性检验

本文基于条件ECM模型,对中国原油价格与原油供给和需求以及影响供给和需求的国内生产总值和原油已探明储量的内生性或外生性进行检验。结果表明,原油价格具有弱外生性、强外生性的特点,已经成为中国经济体系的外生变量;中国原油价格脱离国内供求关系,没有完全反映中国自身原油资源稀缺程度。中国势必要推进原油定价机制的转型,为夺取定价权提供基础。     

封闭式基金的投资风格的实证研究——以动态的视角

本文回顾了Sharpe(1992)的资产因子回归模型,并用于分析我国的封闭式基金的投资风格。研究发现,样本基金中实际投资风格偏离了宣称的投资风格,同一个基金投资风格前后不一致,而且样本基金存在着投资风格趋同的现象。而且通过动态的视角,说明了该模型被忽略的价值。     

基于自回归分布滞后模型的我国财产险保费增长实证研究

通过建立财产险保费增长的自回归分布滞后模型,使用Engle-Granger两步法对1980—2010年我国产险保费增长进行实证研究。研究结果表明,我国财产险保费与GDP之间存在着协整关系,自回归分布滞后模型比经典回归模型具有更好的拟合效果和预测能力。     

我国铝期货与现货价格均衡关系实证研究

期货市场与现货市场是一对关联程度非常高的市场,本文以上海期货交易所铝期货和现货为例,利用协整检验、误差修正模型等方法,得到了我国铝期货市场与现货市场长期均衡关系和短期动态关联关系,表明我国铝期货市场已基本具备市场价格发现功能,并形成了价格自我约束机制。     

内蒙古自治区青年群体就业压力研究

当前,青年就业问题已成为我国劳动力市场的重点和难点问题,本文分析了当前就业压力过大的成因,在研究内蒙古自治区青年群体就业的现状后,找出了影响就业的各种因素,建立了影响就业的指标体系,并运用逐步回归法从中提取主要的影响因素进行实证分析。另外从三大产业对就业的影响入手,从而寻求解决问题的突破口,提出相关的解决内蒙古青年就业的一些建议。