Data Sourcing, Statistical Processing and Time Series Analysis Presented at EDAMBA summer school, Soréze (France) 23 July – 27 July 2009 An Example from.

Slides:

Advertisements

Similar presentations

The Efficient Market Hypothesis

Advertisements

COMM 472: Quantitative Analysis of Financial Decisions

Empirical Analysis of Fund of Hedge Funds (Tass database) Presented to: Research Project and Working Paper.

1 V. Simplifying the Portfolio Process. 2 Simplifying the Portfolio Process Estimating correlations Single Index Models Multiple Index Models Average.

Factor Model Based Risk Measurement and Management R/Finance 2011: Applied Finance with R April 30, 2011 Eric Zivot Robert Richards Chaired Professor of.

Parametric Pricing Models for Hedge Funds Presented at University of Stellenbosch Business School Colloquium - 20 November 2009 An Introduction to Quantitative.

6 Efficient Diversification Bodie, Kane, and Marcus

Introduction Data and simulation methodology VaR models and estimation results Estimation performance analysis Conclusions Appendix Doctoral School.

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Portfolio Performance Evaluation 18 Bodie, Kane, and Marcus.

Empirical Financial Economics 5. Current Approaches to Performance Measurement Stephen Brown NYU Stern School of Business UNSW PhD Seminar, June

LECTURE 9 : EMPRICIAL EVIDENCE : CAPM AND APT

Rajesh Shekhar Data Mining Prof. Chris Volinsky. ◦ Use Data Mining techniques to build a portfolio with superior return/risk characteristics using technical.

Asset Management Lecture 22. Review class Asset management process Planning with the client Investor objectives, constraints and preferences Execution.

Managing a Portfolio of Weather Derivatives

McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

FINANCIAL ECONOMETRICS FALL 2000 Rob Engle. OUTLINE DATA MOMENTS FORECASTING RETURNS EFFICIENT MARKET HYPOTHESIS FOR THE ECONOMETRICIAN TRADING RULES.

Investment Course III – November 2007 Topic Two: Asset Allocation: Decisions & Strategies.

Second Training Course in Investment Management Santiago, Chile November 24 – 25, 2005.

Copyright reserved – Roland Rousseau – 1 How Useful are Risk Premia? A Practitioner’s Perspective... September 2009 Roland Rousseau.

McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

Lecture 7: Simulations.

Class Business Homework Upcoming Midterm – Review Session Wed (5/18) 5 – 6 pm 270 TNRB.

MBAD/F 619: Risk Analysis and Financial Modeling Instructor: Linda Leon Fall 2014

Empirical Financial Economics Asset pricing and Mean Variance Efficiency.

Do Stock Prices Fully Reflect Information in Accruals and Cash Flows about Future Earnings? ---Richard G.

B A R C L A Y S G L O B A L I N V E S T O R S 0 Stan Beckers Simon Weinberger Barclays Global Investors Fundamental Factors in Hedge Fund Returns Spitalfields.

Literature Review ZHU Cai AMA. Contents Paper-Searching by Journals 2 Paper -Searching by Authors 3 Results of Elementary Analysis 4 Suggestions 5 Introduction.

20 Hedge Funds Bodie, Kane, and Marcus

Chapter 8 The Efficient Market Hypothesis. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Efficient Market Hypothesis.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Efficient Markets & The Behavioral Critique CHAPTE R 8.

Investments, 8 th edition Bodie, Kane and Marcus Slides by Susan Hine McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights.

The Efficient Market Hypothesis. Any informarion that could be used to predict stock performance should already be reflected in stock prices. –Random.

1 1 Ch11&12 – MBA 566 Efficient Market Hypothesis vs. Behavioral Finance Market Efficiency Random walk versus market efficiency Versions of market efficiency.

INVESTMENTS | BODIE, KANE, MARCUS Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 8 Index Models.

McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

Academic Research Academic Research Dr Kishor Bhanushali M

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 24-1 Portfolio Performance Evaluation.

McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

Robert Engle UCSD and NYU and Robert F. Engle, Econometric Services DYNAMIC CONDITIONAL CORRELATIONS.

Should Life Insurance Companies Invest in Hedge Funds? Thomas Berry-Stölzle, Hendrik Kläver, and Shen Qiu Discussion by Monica Marin Ph.D. Candidate, Finance.

Choosing an Investment Portfolio

Modeling Risk and Return for Hedge Funds and Fund of Hedge Funds Seattle Economic Council, December 2, 2015 Eric Zivot Robert Richards Chaired Professor.

Market Efficiency.

Chapter 18 Portfolio Performance Evaluation. Types of management revisited Passive management 1.Capital allocation between cash and the risky portfolio.

Chapter 5 Multilevel Models

CAPM Testing & Alternatives to CAPM

Chapter 12 Estimating the Cost of Capital. Copyright ©2014 Pearson Education, Inc. All rights reserved The Equity Cost of Capital The Capital.

Options, Futures, and Other Derivatives, 4th edition © 1999 by John C. Hull 14.1 Value at Risk Chapter 14.

FAMA-FRENCH MODEL Concept and Application

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Efficient Markets & The Behavioral Critique CHAPTER 8.

Stats Term Test 4 Solutions. c) d) An alternative solution is to use the probability mass function and.

Asset Pricing of Financial Institutions: The Cross-Section of Expected Insurance Stock Returns (joint work with M. Eling & A. Milidonis) Early stage paper.

Capital Asset Pricing and Arbitrage Pricing Theory

6 Efficient Diversification Bodie, Kane and Marcus

Portfolio Risk Management : A Primer

Regime Change and Convertible Arbitrage Risk

Multifactor Models and Market Efficiency (BKM 11, 12, 13) BUFN 741: Advanced Capital Markets Topic 4.

Private Equity Indices Based on Secondary Market Transactions

Research Proposal - Final Draft -

Portfolio Performance Evaluation

Alternative Investments and Risk Measurement

Empirical Evidence on Security Returns

Stock Prediction with ARIMA

Carlo A. Favero IGIER, Universita’ Bocconi

Figure 7.1 Efficient Frontier and Capital Market Line

LO 5-1 Compute various measures of return on multi-year investments.

Empirical Research in Innovation

Figure 6.1 Risk as Function of Number of Stocks in Portfolio

Top Down Investing Bottom-up Approach Top-Down Approach

Presentation transcript:

Data Sourcing, Statistical Processing and Time Series Analysis Presented at EDAMBA summer school, Soréze (France) 23 July – 27 July 2009 An Example from Research into Hedge Fund Investments

Presenter:Florian Boehlandt University:University of Stellenbosch – Business School Supervisor:Prof Eon Smit Prof Niel Krige Research Title:Pricing hedge funds a.k.a. The sustainability of parametric and semi- parametric pricing models as estimators of hedge fund performance

‘In the business world, the rearview mirror is always clearer than the windshield’ - Warren Buffett -

Research Purpose 1.Developing accurate parametric pricing models for hedge funds and fund of hedge funds 2.Accounting for the special statistical properties of alternative investment funds 3.Providing practitioners and statisticians with a framework to assess, categorize and predict hedge fund investments

Research Approach Logical-positivistic, deductive research: Postulation of hypotheses that are tested via standard statistical procedures Research Philosophy Empirical analysis: Interpreting the quality of pricing models on the basis of historical data Research Approach External secondary data: Historic time series adjusted for data-bias effects Data Sourcing

Data Sources Hedge Fund Databases CISDM/MAR Financial Databases Risk Simulation Monte Carlo (Solver) Confidence (RiskSim) Data Sourcing DATA POOL

FACTOR ANALYSIS Data Treatment Risk Simulation Statistical Processing Excel / VBA Statistica EViews Data Treatment DATA POOL MODEL BUILDING STATISTICAL CLUSTERING

Data Import Code Fund (Name) Main Strategy Information MM_DD_YYYY (Date) Yield Ptype (ROI or AUM) Performance Leverage (Yes/No) System Information Access DatabaseExcel Pivot table report

Database Management Avoiding duplicate entries Cross-referencing data from various sources Combining and aggregating different databases Efficient storage due to relational data management Queries allow for retrieval/display of specific data Linked-in with Microsoft VBA and Excel (data displayable as Pivot table reports) Searching for specific entries via SQL

Data Bias Survivorship Self- Selection Database Instant History Look-ahead Inclusion of graveyard funds Multiple databases Rolling-window observation / Incubation period

Statistical tests for TSA Regression Statistics (Alpha, Average Error term, Information Ratio) Normality (Chi-squared, Jarque Bera) Goodness of fit, phase-locking and collinearity (Akaike Information Criterion, Hannan-Schwartz) Serial Correlation (Durbin-Watson, Portmanteau) Non-stationarity (unit root)

Prediction Models AR ARMA ARIMA GLS Univariate Multivariate Conditional PCA Polynomial Fitting Taylor Series Higher Co- Moments Constrained Lagrange KKT Simulation

Literature Review Hedge Fund Linear Pricing Models – Sharpe Factor Model (Sharpe, 1992) – Constrained Regression (Otten, 2000) – Fama-French Factor Model (Fama, 1992) Factor Component Analysis (Fung, 1997) Simulation of Trading component (lookback straddle)

Sources Fama, E.F. & French, K.R The Cross-Section of Expected Stock Returns. Journal of Finance, 47(2), June, [Online] Available: % %2947%3A2%3C427%3ATCOESR%3E2.0.CO%3B2-N % %2947%3A2%3C427%3ATCOESR%3E2.0.CO%3B2-N Fung, W. & Hsieh, D.A Empirical characteristics of dynamic trading strategies: the case of hedge funds. Review of Financial Studies, 10(2), Summer, [Online] Available: Otten, R. & Bams, D Statistical Tests for Return-Based Style Analysis. Paper delivered at EFMA 2001 Lugano Meetings, July. [Online] Available: Sharpe, W.F Asset allocation: management style and performance measurement. Journal of Portfolio Management, Winter, [Online] Available: