Journal of Investment Strategies

Risk.net

Hedge fund replication: putting the pieces together

Vincent Weber and Florian Peres

ABSTRACT

In this paper, we aim to bring together into one common framework various advances in factor-based hedge fund replication. Our replication methodology relies on a set of investable dynamic risk factors extracted from futures contract prices and on an automatic variable and model selection procedure. The methodology is then validated by creating out-of-sample replicating portfolios for the monthly returns of about 7000 hedge funds from 2006 to 2012 and under the assumption of transaction costs. Our results suggest that hedge fund replication is on average possible and works best for liquid strategies.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here