Summary
Hedge fund returns are often option-like, which simple models built on stock and bond indices fail to explain. Fung and Hsieh model trend-following funds as lookback straddles, and explain their returns far better.
The paper became a standard benchmark for judging trend-following managers.
Source
- Title
- The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers
- Author
- William Fung and David A. Hsieh
- Year
- 2001
- Published by
- The Review of Financial Studies
- Length
- 29 pages
- File
- PDF · 252 KB