Fat tails: For hedge fund investors, the last free item on the lunch menu
| Mar 16th, 2010 | Filed under: Academic Research, Performance, Analytics & Metrics, Today's Post | By: AAA Staff |
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It’s become practically cliché to note that the 2008 market crash was a stark reminder that hedge funds too can suffer at the hands of a series of highly improbably and unanticipated events – even after looking at their strategy, their diversification and the mean and variance of their past returns.
Yet a recent research study (free registration required) by TrimTabs and BarclayHedge entitled “Do Hedge Fund Investors Care About ‘Fat-Tails’ Risk” caught our attention for a theory put to test: Can hedge fund investors hedge themselves from unforeseen risk events – kurtosis, in economic-speak – that the hedge funds they’re writing checks to might be taking? More…
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[...] on even while watching this year’s World Cup. Sometimes alpha can be found properly dining on tail risk, or in this case, maybe alpha can be found just by remembering the basics. Generate positive [...]