Conditional Hedge Fund trades on macroeconomic information
Meessen, Thomas
Promotor(s) : Lambert, Marie
Date of defense : 23-Jun-2016/28-Jun-2016 • Permalink : http://hdl.handle.net/2268.2/1483
Details
Title : | Conditional Hedge Fund trades on macroeconomic information |
Author : | Meessen, Thomas |
Date of defense : | 23-Jun-2016/28-Jun-2016 |
Advisor(s) : | Lambert, Marie |
Committee's member(s) : | Fays, Boris
Bazgour, Tarik |
Language : | English |
Number of pages : | 96 |
Keywords : | [en] hedge fund [en] hedge funds [en] macroneconomic indicators [en] macroeconomic variables [en] hedge fund performance [en] conditional multifactor model [en] conditonal model |
Discipline(s) : | Business & economic sciences > Finance |
Institution(s) : | Université de Liège, Liège, Belgique |
Degree: | Master en sciences de gestion, à finalité spécialisée en Banking and Asset Management |
Faculty: | Master thesis of the HEC-Ecole de gestion de l'Université de Liège |
Abstract
[en] The recent volatile economic conditions have casted doubt on the supremacy of the hedge fund industry, which should not be correlated with markets. The primarily goal of this thesis is to understand dynamic management style, followed by hedge fund managers and how they have generated returns over these recent market conditions. A conditional multifactor model is developed where traditional buy-and-hold factors are conditioned to one month lagged US macroeconomic indicators. The results confirm the heterogeneity of hedge fund strategies and their exposures to risks factors, as well as the non-normality in their return distributions. The incorporation of conditional buy-and-hold factors on macroeconomic indicators improves the goodness of fit for the model. Managers dynamically manage their exposures in response to changes in their macroeconomic environment. However, managers do not exhibit good timing skills and were not able to generate abnormal returns. Systematic risk is more powerful than unsystematic risk in explaining fund returns. The results contradict the hypothesis of superior performance of hedge funds.
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