Alternative beta refers to the alpha generated in alternative investments that can be explained by tactical asset allocation and time-varying exposures in systematic risks. Hedge fund replication is the name given to a number of different methods that attempt to replicate hedge fund returns. The first approach consists in capturing the performance of alternative betas by tracking the performance of hedge funds. The second approach consists in developing canonical strategies, also called alternative risk premia.
This paper is a survey on momentum strategies. In particular, it shows why momentum investing is a beta strategy and not an alpha strategy. The paper is available at SSRN.
In this paper, we develop a multi-dimensional trend-following model in order to understand the behavior of the momentum risk premium. The paper is available at SSRN.
In this paper, we summarize the main findings related to the concept of alternative risk premia. The paper is available at SSRN.
In this paper, we analyze the concept of alternative risk premia and explore the relationships with hedge fund strategies. The paper is available at SSRN.
In this paper, we formulate hedge fund replication as a tracking problem. Alternative beta is then the result of Bayesian filtering. Illustrations using Kalman filter and different particle filters are provided. We also propose an extension of the linear tracking problem framework to capture the non-normality and non-linearities documented on hedge fund returns. The paper is available at SSRN. The first part of this paper has been published in the Journal of Financial Transformation (paper available here). A new version of the second part is available here.
In this paper, we propose to use the Kalman filter instead of standard rolling windows regressions, We show that it produces better results in terms of correlation and tracking error. We also propose a new breakdown of hedge fund performance into traditional beta, alternative beta and alternative alpha. The paper has been published in the Journal of Financial Transformation (paper available here). The working paper is always available at SSRN.
This paper has been published as the chapter 17 of the book Credit, Currency or Derivatives Instruments of Global Financial Stability or Crisis?, edited by Jay J. Choi and Michael Papaioannou, The working paper is available at SSRN.
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