Thursday 2 February 2023  1:15pm-2:15 pm

Is it Alpha or Beta? A Formal Evaluation of Hedge Fund Models

Olivier Scaillet Professor of finance and statistics at GSEM, Université de Genève

Abstract:

Decomposing hedge fund returns into alpha and beta is challenging because any benchmark model is unlikely to capture all the alternative hedge fund strategies. We develop a novel approach to test the ability of any proposed model to capture these strategies. This approach identifies sharper models and improves the decomposition of fund returns. Our tests reveal that standard factor models are similar to the CAPM and thus unable to capture alternative strategies. In contrast, a parsimonious model based on economically-motivated factors (including carry, time-series momentum, and variance) captures common hedge fund strategies and delivers a sizable reduction in performance.

Registration, please contact robin@em-lyon.com

📍 The seminar will take place at emlyon business School (Ecully campus) – Room A 235, building A.

Olivier Scaillet

Professor of finance and statistics at GSEM, Université de Genève