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

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dc.contributor.advisorVan Rensburg, Paulen_ZA
dc.contributor.authorNoakes, Michael Aen_ZA
dc.date.accessioned2016-09-14T12:50:50Z
dc.date.available2016-09-14T12:50:50Z
dc.date.issued2016en_ZA
dc.description.abstractIt 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.identifier.apacitationNoakes, 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/11427/21753en_ZA
dc.identifier.chicagocitationNoakes, 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/11427/21753en_ZA
dc.identifier.citationNoakes, M. 2016. Factor-based replication of hedge funds using a state space model. University of Cape Town.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
dc.identifier.urihttp://hdl.handle.net/11427/21753
dc.identifier.vancouvercitationNoakes 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/11427/21753en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentDepartment of Finance and Taxen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherInvestment Managementen_ZA
dc.titleFactor-based replication of hedge funds using a state space modelen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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