Friday, February 5, 2010


Do Hedge Fund Investors Care About “Fat-Tails” Risk?

The topical study from the February 2010 issue of The Hedge Fund Flow Report. Gain insight into industry trends and hedge fund asset flows before you make your next important decision.

Many academic studies teach; and the collapse in equity prices in 2008 reminds, that hedge funds are subject to brutal sell-offs one would not expect looking solely at the mean and variance of their historical returns. Kurtosis measures the risk of a highly implausible event coming to pass more frequently than one would expect from a normally distributed variable. Nassim Taleb popularized this notion in The Black Swan, his well-timed 2007 book.
We used the BarclayHedge database to measure the kurtosis of hedge fund returns and how it impacts hedge fund flows. We were especially interested to know if kurtosis is priced in, or if non-normal returns offer arbitrage opportunities for sophisticated investors.
We believe this study supplements the existing literature for three reasons:

Its simplicity - Our goal was not to run a battery of complex econometric tests on the data, but rather 1. to see whether hedge fund investors can hedge themselves from the problem of kurtosis. . . .

Accredited investors can read the entire article for free.

From the February 2010 issue of The Hedge Fund Flow Report. The Hedge Fund Flow Report combines the accuracy of the BarclayHedge database with the analytical insight of TrimTabs Investment Research. The report is generated by TrimTabs Investment Research using the most current data on thousands of hedge funds. An annual subscription includes 12 monthly updates as well as a spreadsheet containing historical flow aggregates by category.

To download a free sample of the entire TrimTabs Hedge Fund Flow Report, simply fill out this short request form.

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