AGARWAL, Vikas and Narayan Y. NAIK, Generalised Style Analysis of Hedge Funds, 2000. "We find that the generalised style analysis approach is more robust for estimating the risk exposures of hedge funds that take short positions in various asset classes and typically hold significant part of their portfolio in cash."
AGARWAL, Vikas and Narayan Y. NAIK, Performance Evaluation of Hedge Funds with Option-based and Buy-and-Hold Strategies, Centre for Hedge Fund Research and Education Working Paper, 2001. "Although, in practice, hedge funds can follow a myriad of dynamic trading strategies, we find that a few simple option writing/buying strategies are able to explain a significant proportion of variation in the hedge fund returns over time."
AMENC, Noël, Lionel MARTELLINI and Mathieu VAISSIÉ, Benefits and Risks of Alternative Investment Strategies "A detailed analysis of the correlation of hedge fund returns with those of traditional markets tends to prove that it is simplistic to consider those funds as being part of a homogenous asset class. There are actually a large number of alternative strategies, with each having different diversification capabilities. Certain strategies such as Market Neutral, Relative Value, or Convertible Arbitrage generally have a low level of correlation with the performances of the S&P 500, an American stock market index (correlations typically less than 0.5 as an absolute value), and with those of the Lehman Brothers US Aggregate Index, the reference bond index. However, for other strategies such as "Equity Non Hedge or Short Selling, this is absolutely not the case." Following on from this, certain hedge funds have a high level of correlation with the market, and offer returns that are particularly high. Adding this type of fund to a portfolio made up of stocks and bonds would result in an increase in the expected return while retaining a high degree of volatility. Distressed Securities, Emerging Markets, Event Driven, or Global Macro present these characteristics; these strategies can therefore be seen as "Return Enhancers." Conversely, integrating certain alternative strategies with low exposure to market risk, or indeed negative exposure, will result in a lowering of the portfolio's volatility. The Convertible Arbitrage, Fixed Income Arbitrage, Market Neutral or Short Selling (negative correlation) strategies correspond to this profile. These strategies can therefore be seen as Risk Reducers, or even as Pure Diversifiers (Short Selling)." "...it has often been observed that a certain number of hedge funds pursuing a “fixed-income arbitrage” type strategy acted as liquidity providers on fixed-income security markets that were exposed to default risk, a role typically taken on by the trading desks of the major investment banks."
BROWN, Stephen J. and William N. GOETZMANN, Hedge Funds With Style, NBER Working Paper No. 8173. 2001. "We find that differences in investment style contribute about 20 percent of the cross sectional variability in hedge fund performance."
DAVIES, Ryan J., Harry M. KAT and Sa LU, Single Strategy Funds of Hedge Funds "We show that some single strategy funds of hedge funds may be under-diversified and that covariance, coskewness, and cokurtosis, rather than variance, skewness and kurtosis, matter most in portfolio diversification."
DOR, Arik Ben and Ravi JAGANNATHAN, Understanding Mutual Fund and Hedge Fund Styles Using Return Based Style Analysis "When style analysis is applied to sector oriented funds such as healthcare, precious metals, energy, technology, etc., the set of benchmarks should include sector or industry indexes. [...] we show how to analyze the investment style of hedge fund managers by including the returns on selected option based strategies as style benchmarks."
FUNG, W. and D. HSIEH, "Asset-Based Style Factors for Hedge Funds", Financial Analysts Journal 58, 16-27.,2002
FUNG, W. and D. HSIEH, "The Risk in Fixed-Income Hedge Fund Strategies, Journal of Fixed Income, 2002
FUNG, W. and D. HSIEH, The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers, Review of Financial Studies 14, 313-341, 2001. "We use lookback straddles to model trend-following strategies, and show that they can explain trend-following funds' returns better than standard asset indices."
FUNG, William and David A. HSIEH, The Risk in Fixed-Income Hedge Fund Styles, August 2002. "The paper finds that fixed-income hedge funds tend to be exposed to a common ABS factor: credit spreads."
HSIEH, David A. and William FUNG, Asset-based Hedge-fund Styles and Portfolio Diversification, Working Paper, Center for Hedge Fund Research, London Business School, and Fuqua School of Business, Duke University, Financial Analysts Journal, 2001
HSIEH, David A. and William FUNG, The Risk of Hedge Fund Strategies: Theory and Evidence from Fixed Income Funds, 2002.
JAEGER, Lars, "The Benefits of Alternative Investment Strategies In the Institutional Portfolio", November 19th, 2001.
KROKHMAL, Pavlo, Stanislav URYASEV and Grigory ZRAZHEVSKY, Comparative Analysis of Linear Portfolio rebalancing strategies: an application to hedge funds, Research Report, 2001-11.
SIEGMANN, Arjen H. and Andre LUCAS, Explaining Hedge Fund Investment Styles by Loss Aversion: A Rational Alternative, Working Paper, Vrije Univesiteit, Amsterdam, The Netherlands, 2002. "Following the current empirical literature, we solve a static asset allocation problem that includes a nonlinear instrument. We show analytically that four different pay-off functions may be rationally optimal."