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 the
F 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 Neutral
Nippon Market Neutral
Axiom Emerging Markets
CTA
HFR
TRE
MAR
HFR
TRE
MAR
HFR
TRE
MAR
HFR
TRE
MAR
Bills
–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**
0.60
0.49*
0.72**
Market Neutral
1.86**
0.98*
2.49**
1.89**
1.44**
3.01*
Emerging Markets
–0.51**
0.32**
0.81**
–0.17
Managed Futures
0.32
1.28**
1.51**
Fixed Income
0.81*
0.85**
Event Driven
1.47**
1.82**
At-the-money call
0.014*
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