Wed, Jun 29, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers January 2013

Peter Urbani's Statistics - Co-Skewness worth 290bp

This month we look at the impact of different objective functions on the out-of-sample performance of optimised strategy allocations, and in particular of the important contribution of co-skewness to the overall skewness of the portfolio for those who care about higher moments

We show that the inclusion of higher moments to your portfolio construction process is worth +290 bp per annum over and above the performance of a broad Hedge Fund Index (Dow Jones Blue Chip Index). We also show that optimal weights for those who prefer higher odd moments (Mean, Skew etc.) are generally higher in the direction of those assets exhibiting positive relative skewness, or co-skewness, with either a benchmark or the portfolio itself. To illustrate, we conduct out-of-sample back testing on the 10 Main Dow Jones CSFB Blue Chip Hedge Fund Strategy Indices from Jan 2006 to Dec 2012. The initial look-back period is 24 months and rebalancing takes place bi-annually.

Objective functions used include; maximising the Sharpe ratio, which is equivalent to the classical minimum variance portfolio of Markowitz’s MPT, Maximising the ratio of the CAGR to both the normal, best fit and modified conditional value at risk (CVaR) or Expected Shortfall. This is sometimes called the STAR Ratio. As a control we compare the results to the benchmark index, and both a buy and hold and rebalanced equally weighted index.

The results show that the Modified and Best Fit methods outperform the Minimum Variance / Maximum Sharpe ratio method, the Benchmark Index and ......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Blackstone buys minority stake in New York-based credit hedge fund Marathon[more]

    Benedicte Gravrand, Opalesque Geneva: Blackstone Strategic Capital Holdings Fund, a vehicle managed by Blackstone Alternative Asset Management (BAAM), has acquired a passive, minority interest in Marathon Asset Management, for an undisclosed sum. Based in New York,

  2. Investing - Soros, Druckenmiller among hedgies profiting in market plunge, Hedge funds were most bullish on bonds since 2004 before Brexit, Surprise Brexit vote unleashes scramble for dollars, High-yield hit on Brexit but no panic selling, Scientist turned hedge fund founder lured to pound, euro, Hedge fund avoids commodities, posts big gains[more]

    Soros, Druckenmiller among hedgies profiting in market plunge From HITC.com: Bullish positions in gold and volatility and well-timed short bets on China and emerging markets, among other areas, were some of the trades that benefited hedge funds on Friday as markets digested Britons' s

  3. Manager Profile - A 26-year old hedge fund manager called Brexit — here's what he thinks about the historic vote[more]

    From Businessinsider.com: Taylor Mann is not your typical fund manager. The twenty-six year old Texas A&M graduate manages Pine Capital in Larue, Texas (population 160), where he resides with his three-year old daughter. Also atypical compared with many of the largest funds out there, Mann makes

  4. People - Mariner Investment’s co-CIO Williams to leave $5.5bn firm, IOOF hires new alternatives portfolio manager[more]

    Mariner Investment’s co-CIO Williams to leave $5.5bn firm From Bloomberg.com: Basil Williams, co-chief investment officer of Mariner Investment Group, is leaving the $5.5 billion hedge-fund firm after negotiations to renew his contract failed. Williams will stay in his role until t

  5. Hedge Fund Due Diligence Exchange offers complete due diligence reports at $1500[more]

    Matthias Knab, Opalesque: HFDDX is offering complete alternative investment due diligence reports at $1500 US. Industry professionals can simply go to www.hfddx.com and indicate their interest in sponsoring one or more DD Reports for $1500 each.