Risk Measures for Autocorrelated Hedge Fund Returns

Arbeitspapier

Standard risk metrics tend to underestimate the true risks of hedge funds becauseof serial correlation in the reported returns. Getmansky et al. (2004) derive mean,variance, Sharpe ratio, and beta formulae adjusted for serial correlation. Followingtheir lead, adjusted downside and global measures of individual and systemic risksare derived. We distinguish between normally and fat tailed distributed returnsand show that adjustment is particularly relevant for downside risk measures in thecase of fat tails. A hedge fund case study reveals that the unadjusted risk measuresconsiderably underestimate the true extent of individual and systemic risks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 11-084/2/DSF 23

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Financial Institutions and Services: Government Policy and Regulation
• Subject: Hedge funds ; Serial correlation ; Systemic risk ; VaR ; Pareto distribution. ; Hedgefonds ; Kapitaleinkommen ; Autokorrelation ; Risiko ; Messung

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cesare, Antonio Di ; Stork, Philip A. ; de Vries, Casper G.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/87215
• Last update: 10.03.2025, 11:42 AM CET