Hedge funds' dynamic exposures to risk factors

academic paper

Hedge funds are exposed to different risk factors. If we consider that for each strategy there is a corresponding set of underlying risk factors, the best funds, for a given strategy, are those that successfully manage to over- or underweight their exposure to the different risk factors in accordance with market conditions.

As a result of this tactical factor allocation strategy, hedge funds' exposure to the risk factors evolves over time. In addition, since the markets are relatively

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