Unpublished conference/Abstract (Scientific congresses and symposiums)
Dynamic Hedge Fund Style Analysis with Errors-in-Variables
Bodson, Laurent; Hübner, Georges; Coën, Alain
2008Academy of International Business
 

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Keywords :
Style analysis; Kalman filter; Errors-in-variables
Abstract :
[en] This paper revisits the traditional return-based style analysis (RBSA) in presence of time-varying exposures and errors-in-variables (EIV). We first apply a selection algorithm using the Kalman filter to identify the more appropriate benchmarks for the analyzed fund return. Then, we compute their corresponding higher moment estimated errors-in-variables, i.e. the measurement error series introducing the (cross) moments of order three and four. We adjust the selected benchmarks by subtracting their higher moments estimated EIV from the initial return series, to obtain an estimate of the true uncontaminated benchmarks. We finally run the Kalman filter on these adjusted regressors. Analyzing EDHEC alternative indexes styles, we show that this technique improves the factor loadings and permits to identify more precisely the return sources of the considered hedge fund strategy.
Disciplines :
Finance
Author, co-author :
Bodson, Laurent ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Gestion financière
Hübner, Georges  ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Gestion financière
Coën, Alain
Language :
English
Title :
Dynamic Hedge Fund Style Analysis with Errors-in-Variables
Publication date :
July 2008
Event name :
Academy of International Business
Event place :
Milan, Italy
Event date :
30/06/08-03/07/08
Audience :
International
Available on ORBi :
since 17 December 2008

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