By François-Serge Lhabitant
"An very good and finished resource of knowledge on hedge cash! From a quantitative view Lhabitant has performed it once more via meticulously the real themes within the hedge fund undefined. This booklet has a huge wealth of knowledge and is a important addition to the hedge fund literature. furthermore, it is going to gain institutional traders, excessive web worthy contributors, lecturers and somebody drawn to studying extra approximately this attention-grabbing and infrequently mysterious global of privately controlled funds. Written via essentially the most revered practitioners and lecturers within the zone of hedge funds." -Greg N. Gregoriou, Professor of finance and examine coordinator within the tuition of commercial and Economics at Plattsburgh nation collage of recent York.
"This is a landmark ebook on quantitative ways to hedge cash. All people with a stake in construction hedge fund portfolios will hugely take advantage of this exhaustive consultant. A needs to learn for all these concerned with hedge fund investing." -Pascal Botteron, Ph.D., Head of Hedge Fund Product improvement, Pictet Asset Management
"François-Serge Lhabitant's moment publication will turn out to be a bestseller too - similar to Hedge cash: Myths and boundaries. He truly manages to make quantitative research 'approachable'- even for these much less proficient with numbers. This ebook, like its predecessor, comprises an unparalleled mixture of good judgment and complex strategy. a wonderful consultant to the 'nuts and bolts' of hedge fund research and a 'must' for each severe investor." -Barbara Rupf Bee, Head of different Fund funding crew, HSBC inner most financial institution, Switzerland
"An first-class booklet, supplying deep insights into the complicated quantitative research of hedge cash within the such a lot lucid and intuitive demeanour. a must have complement to Lhabitant's first booklet facing the paranormal and engaging global of hedge cash. hugely recommended!" -Vikas Agarwal, Assistant Professor of Finance, J. Mack Robinson university of industrial, Georgia kingdom University
"Lhabitant has performed it back! while so much books on hedge cash are not anything greater than glorified advertising brochures, Lhabitant's new e-book tells it the way it is actually. obtainable and comprehensible yet whilst thorough and critical." -Harry M. Kat, Ph.D., Professor of hazard administration and Director replacement funding examine Centre, Cass enterprise university, urban University
"Lhabitant's newest paintings on hedge cash all over again gives you on a few bold delivers. effectively bridging thought and perform in a hugely available demeanour, these looking for a radical but unintimidating advent to the quantitative tools of hedge fund research are not disappointed." -Christopher L. Culp, Ph.D., Adjunct Professor of Finance, Graduate university of commercial, The college of Chicago and primary, Chicago companions LLC
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Additional resources for Hedge Funds: Quantitative Insights
If we cannot agree about what happened in the past, how can we attach any value to our forecasts for the future? In order to interpret correctly the statistics of hedge fund performance and separate the wheat from the chaff, the reader must ﬁrst understand the basic quantitative concepts and 16 Hedge Funds know what is hidden behind the notions of “risk” and “return”. In this chapter, we attempt to demystify both the statistical analysis of hedge fund returns and result interpretation, in an effort to enhance our future decision-making process.
The strategy’s proﬁt objective is to exploit mispricings in as risk-free a manner as possible. Returns often come from mean reversion (the undervalued security that has been bought, moving up in price or the overvalued security that has been sold short, declining in price), or from sector/country bets. Pair trading, which involves highly correlated stock pairs that have deviated from their historical pricing relationship, is a popular example of this strategy. Note that market neutral funds should not be confused with long/short investment strategies.
3 THE CURRENT STATE OF THE HEDGE FUND INDUSTRY It is relatively difﬁcult to obtain statistics on the overall hedge fund industry, as advertising and reporting of hedge fund information is restricted by the Securities and Exchange Commission in the USA, by the Financial Services Authority in the UK, by the Central Bank in Ireland and more generally, by regulatory authorities in most countries. Consequently, most available hedge fund information is either voluntarily submitted or incomplete and therefore may be subject to many biases that we will discuss later.