Journal of Risk

Hedge funds revisited: distributional characteristics, dependence structure and diversification

Hélyette Geman, Cécile Kharoubi


During the last decade, hedge funds have become an increasingly attractive class of assets, viewed as investments offering greater returns while risk is reduced through extensive diversification. Hedge funds have indeed grown exponentially in size, number and management style. The goal of this article is to revisit the following three issues: (i) Is the normality assumption appropriate for hedge funds returns? (ii) Do hedge funds indeed provide superior investments? (iii) Do hedge funds still exhibit the diversification property emphasized in most of the existing literature when a better representation of their dependence structure is introduced? Our answer to the first two questions is rather negative. Regarding the third one, our analysis based on copula functions provides mitigated results and leads us to conclude that a distinction ought to be made between general hedge funds and specific categories as “Global-Macro” or “Market neutral” in terms of the diversification benefits they bring to standard asset classes such as stocks and bonds.

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 View our subscription options

You need to sign in to use this feature. If you don’t have a 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