Anon

(Dana P.) #1
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

Free download pdf