TABLE
4.1
Hedge Funds Style Analysis Using Stepwise Regression
This exhibit reports for each fund the results of a stepwise estimation using 12 asset classes, five hedge funds indexes, and four option strategies. The analysis is repeated separately for each hedge fund database. Stepwise regression involves adding and/or deleting variables sequentially depending on theF value. We specify a 10% significance level for deleting a variable in the stepwise regression procedure.The single (*) and double (**) asterisks denote significantly different than zero at the 5% and 1% level, respectively.Hillsdale Market NeutralNippon Market NeutralAxiom Emerging MarketsCTAHFRTREMARHFRTREMARHFRTREMARHFRTREMARBills–23.36*31.9** 23.36 Treasury 1–10 yrs–7.32**–4.58**–6.07**Treasury 10+ yrs–0.37 Corporate Bonds 3.11**1.75* 2.62** 2.86**Large-Cap Value–0.21 –0.24* –0.37**Large-Cap Growth 0.38** 0.35**–0.29* Small-Cap Value 0.47** 0.52**Small-Cap Growth–0.39**–0.18**–0.26**–0.17 –0.23* Developed Countries–0.29 Japan 0.23**0.15 –0.23*–0.33**–0.19**Emerging Markets–0.33**–0.33** 0.36**Foreign Bonds–0.58**0.600.49* 0.72**Market Neutral1.86**0.98* 2.49** 1.89** 1.44**3.01*Emerging Markets –0.51** 0.32** 0.81**–0.17 Managed Futures0.32 1.28** 1.51**Fixed Income0.81* 0.85**Event Driven 1.47** 1.82**At-the-money call0.014*0.012* 0.02** 0.02**At-the-money put –0.10*–0.12 0.08 –0.10**Out-of-the-money put 0.08*–0.02 0.2**–0.08 0.09**(^2) R
0.46
0.27
0.22
0.21
0.33
0.29
0.82
0.82
0.80
0.19
0.68
0.77
Source:
Exhibit 1.13 in Arik Ben Dor and Ravi Jagannathan, “Style Analysis: Asset Allocation and Performance Evaluation,” in
The Hand-
book of Equity Style Management,
3rd
ed., ed. T. Daniel Coggin and Frank J. Fabozzi
(Hoboken, NJ: John Wiley & Sons, 2003).
89