Factor-based replication of hedge funds using a state space model

 

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dc.contributor.advisor Van Rensburg, Paul en_ZA
dc.contributor.author Noakes, Michael A en_ZA
dc.date.accessioned 2016-09-14T12:50:50Z
dc.date.available 2016-09-14T12:50:50Z
dc.date.issued 2016 en_ZA
dc.identifier.citation Noakes, M. 2016. Factor-based replication of hedge funds using a state space model. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/21753
dc.description.abstract It has been suggested that the Kalman filter technique may be used to improve the quality of hedge fund replication, compared to existing replication techniques. This study uses the Kalman filter technique, along with three variations of the rolling-window regression technique, to create clones which attempt to replicate the returns of various categories of hedge fund indices. These clones are created over several scenarios and are used to compare the ability of the Kalman filter and rolling-window regression techniques. The clones are constructed using South African specific asset class and investment style factors. This study finds that the Kalman filter does not provide the expected improvement in replication ability over the rolling-window regression, for the hedge fund indices analysed. The competing techniques appear to each be better suited to replicating different hedge fund index strategies and may, therefore, be used in combination. While some of the hedge fund clones offer desirable risk characteristics, they offer lower mean returns and underperform their indices in most periods. As such, the hedge fund clones constructed in this study require further refinement and are not yet equipped for use in practice. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Investment Management en_ZA
dc.title Factor-based replication of hedge funds using a state space model en_ZA
dc.type Master Thesis
uct.type.publication Research en_ZA
uct.type.resource Thesis en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Commerce en_ZA
dc.publisher.department Department of Finance and Tax en_ZA
dc.type.qualificationlevel Masters
dc.type.qualificationname MCom en_ZA
uct.type.filetype Text
uct.type.filetype Image
dc.identifier.apacitation Noakes, M. A. (2016). <i>Factor-based replication of hedge funds using a state space model</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/21753 en_ZA
dc.identifier.chicagocitation Noakes, Michael A. <i>"Factor-based replication of hedge funds using a state space model."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2016. http://hdl.handle.net/11427/21753 en_ZA
dc.identifier.vancouvercitation Noakes MA. Factor-based replication of hedge funds using a state space model. [Thesis]. University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2016 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/21753 en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Noakes, Michael A AB - It has been suggested that the Kalman filter technique may be used to improve the quality of hedge fund replication, compared to existing replication techniques. This study uses the Kalman filter technique, along with three variations of the rolling-window regression technique, to create clones which attempt to replicate the returns of various categories of hedge fund indices. These clones are created over several scenarios and are used to compare the ability of the Kalman filter and rolling-window regression techniques. The clones are constructed using South African specific asset class and investment style factors. This study finds that the Kalman filter does not provide the expected improvement in replication ability over the rolling-window regression, for the hedge fund indices analysed. The competing techniques appear to each be better suited to replicating different hedge fund index strategies and may, therefore, be used in combination. While some of the hedge fund clones offer desirable risk characteristics, they offer lower mean returns and underperform their indices in most periods. As such, the hedge fund clones constructed in this study require further refinement and are not yet equipped for use in practice. DA - 2016 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2016 T1 - Factor-based replication of hedge funds using a state space model TI - Factor-based replication of hedge funds using a state space model UR - http://hdl.handle.net/11427/21753 ER - en_ZA


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