Year: 2008
Type: article
Abstract: Using a variety of different definitions of “neutrality,” this study presents significant evidence against the neutrality to market risk of hedge funds in a range of style categories. I generalize standard definitions of “market neutrality,” and propose five different neutrality concepts. I suggest statistical tests for each neutrality concept, and apply these tests to a database of monthly returns on 1423 hedge funds from five style categories. For the “market neutral” style, approximately one-quarter of the funds exhibit significant exposure to market risk; this proportion is statistically significantly different from zero, but less than the proportion of significant exposures for other hedge fund styles.
Source: Review of Financial Studies
DOI: 10.1093/rfs/hhn113
Author: Andrew J. Patton
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2248113644