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Hedge Fund Styles: Risk and Return of European Equity Long/Short Hedge Funds

Mastrovito, Elisabeth LU (2011) NEKM02 20111
Department of Economics
Abstract
In this thesis I have investigated drivers of European Equity Long/Short hedge funds by analyzing the risk and return of individual Equity Long/Short hedge funds in different market environments. The results show that there are few macroeconomic drivers that can consistently explain the risk and return of individual European Equity Long/Short hedge funds. Running multifactor regression models on each individual hedge fund’s returns against different market factors over a nine year time period gives adjusted R-squares of around 40% for about one third of the hedge funds in the sample. However, some of the hedge funds cannot be explained at all from this model, and others have adjusted R-squares of only about 10%. The Equity Long/Short hedge... (More)
In this thesis I have investigated drivers of European Equity Long/Short hedge funds by analyzing the risk and return of individual Equity Long/Short hedge funds in different market environments. The results show that there are few macroeconomic drivers that can consistently explain the risk and return of individual European Equity Long/Short hedge funds. Running multifactor regression models on each individual hedge fund’s returns against different market factors over a nine year time period gives adjusted R-squares of around 40% for about one third of the hedge funds in the sample. However, some of the hedge funds cannot be explained at all from this model, and others have adjusted R-squares of only about 10%. The Equity Long/Short hedge funds are, for the most part, driven by equity market factors, however, exposure is time-varying. The diversity in the results imply that in evaluating individual hedge funds, single fund evaluation is of great importance. Sub-style indexes, like the CSFB/Tremont Long/Short hedge fund index, can only set up the boundaries of return for Equity Long/Short hedge funds within that style. Any funds moving outside these boundaries need to be re-analysed and re-evaluated. (Less)
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author
Mastrovito, Elisabeth LU
supervisor
organization
course
NEKM02 20111
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Hedge Funds, OLS, Equity Long/Short, Risk and Return Drivers
language
English
id
1974178
date added to LUP
2011-06-16 15:11:21
date last changed
2011-06-16 15:11:21
@misc{1974178,
  abstract     = {{In this thesis I have investigated drivers of European Equity Long/Short hedge funds by analyzing the risk and return of individual Equity Long/Short hedge funds in different market environments. The results show that there are few macroeconomic drivers that can consistently explain the risk and return of individual European Equity Long/Short hedge funds. Running multifactor regression models on each individual hedge fund’s returns against different market factors over a nine year time period gives adjusted R-squares of around 40% for about one third of the hedge funds in the sample. However, some of the hedge funds cannot be explained at all from this model, and others have adjusted R-squares of only about 10%. The Equity Long/Short hedge funds are, for the most part, driven by equity market factors, however, exposure is time-varying. The diversity in the results imply that in evaluating individual hedge funds, single fund evaluation is of great importance. Sub-style indexes, like the CSFB/Tremont Long/Short hedge fund index, can only set up the boundaries of return for Equity Long/Short hedge funds within that style. Any funds moving outside these boundaries need to be re-analysed and re-evaluated.}},
  author       = {{Mastrovito, Elisabeth}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Hedge Fund Styles: Risk and Return of European Equity Long/Short Hedge Funds}},
  year         = {{2011}},
}