Summary
It is a great pleasure to congratulate Professor Phelim Boyle and Sun Siang Liew on this stimulating and timely paper, which provides a valuable account of the asset allocation problem of an investor when hedge funds are included as investment vehicles. The results presented in this paper are of much interest to both the actuarial and the finance profession. It is commonly known that returns from hedge funds exhibit nonlinear behavior, which may be attributed to highly leveraged and unconventional trading strategies adopted by hedge fund managers. Under the regime-switching models, those important empirical features of hedge fund returns can be generated by the presence of a hidden Markov chain. The regime-switching models are nonlinear and non-stationary. The asset-based style model can provide a convenient way to deal with the asset allocation problem with hedge funds, especially when one wishes to consider the asset allocation problem of a large group of hedge funds, which can be explained by the same set of style factors.
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Extract
'Asset Allocation with Hedge Funds On the Menu,' Phelim Boyle and Sun Siang Liew, October 2007
It is a great pleasure to congratulate Professor Phelim Boyle and Sun Siang Liew on this stimulating and timely paper, which provides a valuable account of the asset allocation problem of an investor when hedge funds are included as investment vehicles. The results presented in this paper are of much interest to both the actuarial and the finance profession. Recently hedge funds have come under the spotlight in global financial mark...
See the full content of this document
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