Summer of 1000 Posts: Performance, Analytics & Metrics

19 Jul 2009

Today, we bring you another installment of our “Summer of 1,000 posts” (more…)

This week’s sampling from our archives covers the topic of Performance, Analytics & Metrics…

Debate over value of Sharpe Ratio in HF analysis continues in new academic study
A 2007 academic study rained on the alternative hedge fund metrics parade and claimed that the good old fashioned Sharpe ratio was all you needed.  But another study released this spring suggests that alternative metrics such as the Sortino ratio, Omega ratio and Rachev ratio have a purpose after all.

Investing in some stocks should have qualified as an “extreme sport” says leading quant
Last week, a prominent academic showed how the S&P 500 had become an “extreme” sport before it tanked last year.  This week, that same researcher turns his focus on an individual stock that we know all too well.

Lintner Redux: Omega Ratios and Managed Futures
If only storied academic John Lintner had the Omega Ratio…

2008: The year of the small fund anomaly
Being small and young has always been a virtue in Hedgistan.  But one of these poles reversed in 2008.  Now being big and young seems to produce results.  Too bad it’s virtually impossible to achieve these ends simultaneously any more.

Incubation bias: Not just a hedge fund issue according to two law professors
Academics and hedge fund investors often complain about an “incubation bias” in hedge fund data bases since reporting is voluntary (i.e., hedge fund managers will only report returns if they are good).  But according to two law professors, mutual funds have been doing the same for years.  And they say the SEC should do something about it.

A new look at who is more susceptible to “hedge fund contagion”
A new academic paper confirms the belief that some hedge fund strategies have a higher correlation with the S&P 500 in times of stress.  But it turns out that this axiom does not apply to all hedge fund strategies.

One HF strategy that is decoupling from the decoupling
“Decoupling” is back.  Only this time it refers not to the disconnection of global economies, but to the disconnection between hedge funds and the equity markets.  But it doesn’t end there.  Some individual hedge fund strategies are also decoupling from the broader hedge fund industry.

Study says return-chasing could be “driving a wedge between fund and investor returns”
Research has previously shown that hedge fund investors, like all investors, tend to exhibit “return chasing” behavior.  Now a new academic study shows the real cost of this unfortunate proclivity.

Academic study breaks with pack on one of the most common assumptions about hedge fund returns
A new academic paper questions the popular assumption that hedge funds are really just option-writers in drag.

If hedge fund “overcrowding” was bad for returns, is recent “undercrowding” going to be good?
Research has long suggested that inflows of capital into the hedge fund industry hurt alpha returns.  But does the opposite hold true?  Do outflows bode well for the industry?

Calculating alpha as the market crashes
Two experts weight in on how traditional views of manager value-add need to be revisited during a violent market downturn.

New spin on an old metric
The Sharpe ratio is the granddaddy of financial metrics.  But a graphical take on the old stalwart provides a new way to keep portfolios in good shape.

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