Template-type: ReDIF-Paper 1.0
Author-Name: David E. Allen
Author-Email: d.allen@ecu.edu.au
Author-Person: pal66
Author-Workplace-Name: School of Accounting, Finance and Economics Edith Cowan University, Australia.
Author-Name: Michael McAleer
Author-Person: pmc90 
Author-Workplace-Name: Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute,
	The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of Economic Research, Kyoto University. 
Author-Name: Shelton Peiris
Author-Workplace-Name: School of Mathematics and Statistics, University of Sydney
Author-Name: Abhay K. Singh
Author-Workplace-Name: School of Accounting, Finance and Economics, Edith Cowan University, Australia
Title: Hedge Fund Portfolio Diversification Strategies Across the GFC
Abstract: This paper features an analysis of the e_ectiveness of a range of portfolio diversification strategies as applied to a set of 17 years of monthly 
	hedge fund index returns on a set of ten market indices representing 13 major hedge fund categories, as compiled by the EDHEC Risk Institute. The 
	17-year period runs from the beginning of 1997 to the end of August 2014. The sample period, which incorporates both the Global Financial Crisis 
	(GFC) and subsequent European Debt Crisis (EDC), is a challenging one for the application of diversi_cation and portfolio investment strategies. 
	The analysis features an examination of the diversification bene_ts of hedge fund investments through successive crisis periods. The connectedness 
	of the Hedge Fund Indices is explored via application of the Diebold and Yilmaz (2009, 2014) spillover index. We conduct a series of portfolio 
	optimisation analyses: comparing Markowitz with naive diversi_cation, and evaluate the relative e_ectiveness of Markowitz portfolio optimisation 
	with various draw-down strategies, using a series of backtests. Our results suggest that Markowitz optimisation matches the characteristics of 
	these hedge fund indices quite well.
Keywords:  Hedge Fund Diversi_cation, Spillover Index, Markowitz Analaysis, Downside Risk, CVaR, Draw-Down.
Classification-JEL: G11, C61.
Length: 27 pages
Creation-Date: 2014
Number: 2014-32 
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1432.txt
File-URL: https://eprints.ucm.es/id/eprint/27823/1/1432.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1432