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Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds

Review of Financial Studies · 1997 · Vol. 10(2) · pp. 275–302

William Fung✉(Paradigm (France))David A. Hsieh(Duke Energy (United States))

Abstract

This article presents some new results on an unexplored dataset on hedge fund performance. The results indicate that hedge funds follow strategies that are dramatically different from mutual funds, and support the claim that these strategies are highly dynamic. The article finds five dominant investment styles in hedge funds, which when added to Sharpe’s (1992) asset class factor model can provide an integrated framework for style analysis of both buy-and-hold and dynamic trading strategies.

Financial Markets and Investment Strategies Complex Systems and Time Series Analysis Stock Market Forecasting MethodsHedge fundStyle analysisFund of fundsSharpe ratioOpen-end fundReturns-based style analysisTrading strategyBusinessAsset (computer security)Investment style

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