1. bookVolume 12 (2016): Issue 4 (December 2016)
Journal Details
License
Format
Journal
First Published
30 Mar 2015
Publication timeframe
4 times per year
Languages
English
access type Open Access

Maximum Drawdown Measures in Hedge Fund Efficiency Appraisal

Published Online: 01 Aug 2017
Page range: 83 - 91
Received: 23 Sep 2015
Accepted: 30 Dec 2016
Journal Details
License
Format
Journal
First Published
30 Mar 2015
Publication timeframe
4 times per year
Languages
English

The study concentrates on the comparison of hedge fund efficiency measured by maximum drawdown measures with traditional risk/return ratios. The examined period is from 1990 to 2011 and the data were provided by Hedge Fund Research. It is a continuation of the research done for a shorter period, that is for the years 2005 - 2011. The results obtained there were interesting and showed that the results of complex efficiency measures aren’t much different from traditional measures. It posed the question of whether it is worth applying them with their entire complexity. The author wants to check if the same conclusions will be drawn for a longer period. After having analyzed maximum drawdown measures, further research will be devoted to other groups of measures. It should give the answer to the question of whether complex efficiency measures are as useful as it is often stressed in the hedge fund literature.

Keywords

Agarwal, V., Naveen, D., Naik, N. (2004). Flows, Performance, and Managerial Incentives in Hedge Funds. George State University Working Paper, p. 1 - 44. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=424369, 07.10.2014.Search in Google Scholar

Asness, C.R., Krail, J., Liew, J. (2001). Do Hedge Funds Hedge? Journal of Portfolio Management, Vol. 28, 2001, 6 - 19.Search in Google Scholar

Baba, N., Goko, H. (2006). Survival Analysis of Hedge Funds. Bank of Japan Working Paper Series, Bank of Japan, March.Search in Google Scholar

Baquero, G., Verbeek, M. (2009). A Portrait of Hedge Fund Investors: Flows, Performance and Smart Money. Erasmus University Rotterdam Working Paper, p. 1 - 65,. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=773384, 07.10.2014.Search in Google Scholar

Breuer, W., Guertler, M., Schuhmacher, F. (2004). Portfopiomanagement I - Theoretische Grundlagen und praktische Anwendungen, Gabler, Wiesbaden.Search in Google Scholar

Burke, G. (1994). A Sharper Sharpe Ratio. Futures. Vol. 23, Nr 3, p. 56.Search in Google Scholar

Caldwell, T. (1995). Introduction: The Model for Superior Performance. In: Lederman, Jess, Robert A. Klein (Ed.), Hedge Funds. New York: Irwin Professional Publishing.Search in Google Scholar

Chan, N.,Getmansky, M., Haas, S., Lo, A. (2005). Do Hedge Funds Increase Systemic Risk? Economic Review, 91(4), 49 -80.Search in Google Scholar

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010, Official Journal of the European Union, 2011.Search in Google Scholar

Dowd, K. (1998). Beyond Value at Risk. The New Science of Risk Management. New York: John Wiley & Sons.Search in Google Scholar

Eling, M. (2006). Performance Measurement of Hedge Funds Using Data Envelopment Analysis. Working Papers on Risk Management and Insurance No. 25. University of St. Gallen, November, 2- 29.Search in Google Scholar

Eling, M., Schuhmacher, F. (2007). Does the Choice of Performance Measure Influence the Evaluation of Hedge Funds? Journal of Banking and Finance, Nr 31, 2632 - 2647.Search in Google Scholar

Ferreira, P., Berthon, J., Asseraf - Bitton, J., Stenger, J. (2015). Lyxor Research, A New Era for Hedge Funds? Retrieved from http://www.lyxor.com/fileadmin/_fileup/lyxor_wp/document/455/, p. 1 - 24.Search in Google Scholar

Frush, S. (2007). Hedge Funds Demystified. USA: McGraw-Hill.Search in Google Scholar

Fung, H.G., Xu, X.E., Yau, J. (2004). Do Hedge Fund Managers Display Skill? Journal of Alternative Investments, Vol. 6, 2004, 22 - 31.Search in Google Scholar

Fung, W., Hsieh, D. (1997). Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds. Review of Financial Studies, Vol. 10, 275 - 302.Search in Google Scholar

Fung, W., Hsieh, D., Naik, N.Y., Ramadorai, T. (2008). Hedge Funds: Performance, Risk and Capital Formation. Journal of Finance, Vol. 63, 1777 - 1803.Search in Google Scholar

Goetzmann, W., Ingersoll, J., Ross, S. (2003). High-Water Marks and Hedge Fund Management Contracts. Journal ofSearch in Google Scholar

Gregoriou, G.N., Huebner, G., Papageorgiou, N., Rouah, F. (ed.), (2005). Hedge Funds. Insights in Performance Measurement, Risk Analysis, and Portfolio Management. Hoboken: John Wiley & Sons, Inc., 549 - 550.Search in Google Scholar

Gregoriou, G.N., Pascalau, R. (ed.), (2011). Derivatives Pricing, Hedge Funds and Term Structure Models. Palgrave, Macmillan, Hampshire, 10 - 11.Search in Google Scholar

Harlow, W.V. (1991). Asset Allocation in a Downside - Risk Framework. Financial Analysts Journal, September - October, 28 - 40.Search in Google Scholar

Hedges IV, J.R. (2005). Hedges on Hedge Funds. How to Successfully analyze and select an Investment. Hoboken: John Wiley & Sons.. Search in Google Scholar

Internet pages of Credit Suisse First Boston Group.Search in Google Scholar

Jajuga, K. (ed.), (2007). Zarządzanie ryzykiem. Warszawa: PWN.Search in Google Scholar

Kahnemann, D., Tversky, A. (1979). Prospect Theory: an Analysis of Decision under Risk. Econometrica, vol. 47, nr 2, 263- 292.Search in Google Scholar

Kaplan, P.D., Knowles J.A. (2004). Kappa: A Generalized Downside Risk - Adjusted Performance Measure, Morningstar Associates and York Hedge Fund Strategies, January, p. 1 - 17.Search in Google Scholar

Kestner, L.N. (1996). Getting a Handle on True Performance. Futures, Vol. 25, Nr 1, 44 - 46.Search in Google Scholar

Kosowski, R., Naik, N.Y., Teo, M. (2007). Do Hedge Funds Deliver Alpha? A Bayesian and Bootstrap Approach. Journal of Financial Economics, Vol. 84, 229 - 264.Search in Google Scholar

Liang, B. (2000). Hedge Funds: The Living and the Dead. Journal of Financial and Quantitative Analysis, Vol. 35, 309 - 326.Search in Google Scholar

Liang, B. (2001). Hedge Fund Performance 1990 - 1999. Financial Analysts Journal, Vol. 57, 2001, 11 - 18.Search in Google Scholar

Lo, A.W. (2002). The Statistics of Sharpe Ratios. Financial Analysts Journal, July - August, 36 - 50.Search in Google Scholar

Pruchnicka-Grabias, I. (2015a) Zastosowanie miar maksymalnej straty na kapitale w badaniu efektywności funduszy hedgingowych. In: Kwartalnik Kolegium Społeczno - Ekonomicznego. Studia i prace, Nr 3, tom 3 (23)/2015 (pp. 133- 245). Warszawa: Oficyna Ekonomiczna, Szkoła Główna Handlowa w Warszawie.Search in Google Scholar

Pruchnicka-Grabias, I. (2015b). Corporate Financial Risk Management. Warszawa: Szkoła Główna Handlowa w Warszawie.Search in Google Scholar

Pruchnicka-Grabias, I. (2016). Lower Partial Moments and Maximum Drawdown Measures in Hedge Fund Risk - Return Profile Analysis. Universal Journal of Mathematics and Mathematical Sciences. Vol. 9, No. 1 - 2, Pushpa Publishing House, Allahabad, India, 43 - 59.Search in Google Scholar

Sharpe, W.F. (1994). The Sharpe Ratio. Journal of Portfolio Management, Vol. 21, Nr 1, 49 - 58.Search in Google Scholar

Sortino, F.A., van der Meer, R., Plantiga, A. (1999). The Dutch Triangle. Journal of Portfolio Management, Vol. 26, 50 - 58.Search in Google Scholar

Vault Career Guide to Hedge Funds, Vault Career Library, p. 2, see: www.vault.com.Search in Google Scholar

Web pages of Credit Suisse First Boston Group.Search in Google Scholar

Web pages of Hedge Fund Research.Search in Google Scholar

Young, T.W. (1994). Calmar Ratio: a Smoother Tool. Futures, vol. 20, nr 1, 1991, 40.Search in Google Scholar

Recommended articles from Trend MD

Plan your remote conference with Sciendo