Getmansky, Mila, Lo, Andrew W. and Makarov, Igor (2004) An econometric model of serial correlation and illiquidity in hedge fund returns. Journal of Financial Economics, 74 (3). pp. 529-609. ISSN 0304-405X
Full text not available from this repository.Abstract
The returns to hedge funds and other alternative investments are often highly serially correlated. In this paper, we explore several sources of such serial correlation and show that the most likely explanation is illiquidity exposure and smoothed returns. We propose an econometric model of return smoothing and develop estimators for the smoothing profile as well as a smoothing-adjusted Sharpe ratio. For a sample of 908 hedge funds drawn from the TASS database, we show that our estimated smoothing coefficients vary considerably across hedge-fund style categories and may be a useful proxy for quantifying illiquidity exposure.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.sciencedirect.com/science/journal/03044... |
| Additional Information: | © 2004 Elsevier B.V. |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates |
| Date Deposited: | 19 Aug 2013 07:45 |
| Last Modified: | 20 Oct 2021 01:39 |
| URI: | http://eprints.lse.ac.uk/id/eprint/51755 |
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