TABLE 1 - uploaded by Robert J. Bianchi
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We propose a new approach to investment style analysis by classifying the hedge fund universe with the Tibshirani, Walther and Hastie (2001) Gap Statistic. This study finds the statistical presence of only three broad hedge fund investment styles for the period 1994 to 2001. The investment styles can be best described as: quasi-long-equity; non-dir...
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... second subset of data is employed in order to calculate the Gap Statistic over the long-term. Table 1 reports summary statistics on the full sample of survivors and non-survivors. 9 The results provide well-known but nevertheless striking features of hedge fund returns. ...
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... The results provide well-known but nevertheless striking features of hedge fund returns. Table 1 shows that the distributions of hedge fund returns are wide and varied with some funds exhibiting negative skewness and severe excess kurtosis. The Jarque-Bera tests reject the assumption of normality across the majority of the TASS investment style categories. ...
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... again, the skewness, kurtosis and Jarque-Bera statistics of the survivors suggest that a majority of hedge fund returns are not normally distributed. The similarities of Tables 1 and 3 suggest that survivorship bias does not influence the non-normality feature of hedge fund returns. ...
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... the three-factor style model exhibits strong explanatory power, we need to consider the consistency of these three investment styles. To examine style consistency, Table 10 As a second test of style consistency, we follow Gallo and Lockwood (1999) and employ the Chow (1960) test to detect investment style drift between funds and their associated investment styles. The Chow (1960) test examines the stability of regression coefficients over two distinct time periods. ...
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... Chow (1960) test is estimated under a single-factor model. We perform the Chow (1960) tests on the funds in their Gap Statistic classification scheme in Panel A of Table 11 versus their original TASS style classifications in Panel B. ...
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... A of Table 11 reports that 10.78 per cent of funds were found to exhibit style inconsistency when classified in the three Gap Statistic classifications. As a comparison, Panel B reports 10.24 per cent of funds to exhibit style inconsistency when regressed against their TASS peer-group equal weighted portfolio returns. ...
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... a comparison, Panel B reports 10.24 per cent of funds to exhibit style inconsistency when regressed against their TASS peer-group equal weighted portfolio returns. The results in Table 11 provide compelling evidence that little or no loss of style consistency exists when re-classifying the hedge fund universe from eleven TASS styles to three Gap Statistic styles. 17 Chow (1960) breakpoint test as a form of style consistency test. ...
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... regression results in Panel A of Table 12 demonstrate that the style 1 portfolio returns can be replicated with the excess returns from the MSCI World Equity Index (MACWEI) and the Fama-French (1993,1996) small firm (SMB) and momentum (UMD) zero-cost portfolios. In particular, the excess returns from the MACWEI exhibits a very high factor loading. ...
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... construct the following five-factor model. Table 12 reports the regression results which reveal significant factor loadings (at the 1 per cent level) towards a relative long position in the Fama-French small-cap/high book-to-market ratio portfolio and a short portfolio position in the large cap/low book-to-market ratio portfolio. These factor loadings reflect the underlying relative-risk exposure in equities which is consistent with similar findings in Capocci and Hubner (2004). ...
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