Re-evaluating sharpe ratio in hedge fund performance in light of liquidity risk
Abstract
EconStor is a publication server for scholarly economic literature, provided as a non-commercial public service by the ZBW.
Full text
van Horne, Richard; Perez, Katarzyna Article Re-evaluating sharpe ratio in hedge fund performance in light of liquidity risk Journal of Banking and Financial Economics (JBFE) Provided in Cooperation with: Faculty of Management, University of Warsaw Suggested Citation: van Horne, Richard; Perez, Katarzyna (2021) : Re-evaluating sharpe ratio in hedge fund performance in light of liquidity risk, Journal of Banking and Financial Economics (JBFE), ISSN 2353-6845, University of Warsaw, Faculty of Management, Warsaw, Iss. 16, pp. 91-103, https://doi.org/10.7172/2353-6845.jbfe.2021.2.5 This Version is available at: https://hdl.handle.net/10419/313451 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/
DOI: 10.7172/2353-6845.jbfe.2021.2.5 91 91 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by/4.0/) Journal of Banking and Financial Economics 2(16)2021, 91–103 Re-Evaluating Sharpe Ratio in Hedge Fund Performance in Light of Liquidity Risk Richard Van Horne £ȱ¢ȱȱȱȱ ȱȱǰȱȱȱȱȱȱ ǯȱÙïȱŗŖǰȱŜŗȬŞŝśȱ£Ú ĴDZȦȦǯȦŖŖŖŖȬŖŖŖŘȬŚŜŚŞȬşŜŖŗ Katarzyna Perez1 £ȱ¢ȱȱȱȱ ȱȱǰȱȱȱȱȱȱ £¢ǯ£ȓǯ£ǯ ĴDZȦȦǯȦŖŖŖŖȬŖŖŖřȬřřřŗȬŞŚśŜ ABSTRACT 7KLVSDSHUGHPRQVWUDWHVKRZWKH6KDUSH5DWLRFDQEHPRGL¿HGE\DOWHULQJWKHPHDVXUHRI³WRWDO ULVN´LQWKHGHQRPLQDWRURIWKH6KDUSH5DWLRLHWKHVWDQGDUGGHYLDWLRQWRLQFOXGHOLTXLGLW\ ULVNDPDMRUULVNIRULQYHVWRUVLQKHGJHIXQGVWKDWLVPLVVLQJIURPWKHVWDQGDUG6KDUSH5DWLR IRUPXODWLRQ:HUHIHUWRRXUOLTXLGLW\ULVNDGMXVWHGSHUIRUPDQFHUDWLRDVWKH/5$357KHUHVXOWV RIRXUDQDO\VLVRIKHGJHIXQGVDOLYHLQ±VKRZWKDWIXQGVZLWKKLJKHUOLTXLGLW\ULVN H[KLELWKLJKHU6KDUSH5DWLRVDQGKLJKHU$OSKDVDVHVWLPDWHGLQDIDFWRUPRGHOWKDWGRHVQRW LQFRUSRUDWHOLTXLGLW\ULVN:HSRVLWWKDWDQDO\VWVDQGLQYHVWRUVVKRXOGQRWQHFHVVDULO\WDNHWKHVH KLJKHU6KDUSH5DWLRVDQGKLJKHU$OSKDVDVLQGLFDWLRQVRIIXQGVXSHULRULW\ZKDWDSSHDUVWREH VXSHULRUPDQDJHUVNLOOPD\UDWKHUEHDFRPSHQVDWLRQIRUEHDULQJOLTXLGLW\ULVN2XU/5$35LV DWRROWKDWDQDO\VWVRULQYHVWRUVFRXOGXVHWRFRPSDUHIXQGVRQDPRUHHTXDOIRRWLQJDGMXVWLQJIRU GL൵HUHQWLDOOLTXLGLW\ULVNDFURVVIXQGV -(/&ODVVL¿FDWLRQ**& KeywordsOLTXLGLW\ULVNOLTXLGLW\ULVN IDFWRUVHULDOFRUUHODWLRQ6KDUSHUDWLR KHGJHIXQG SHUIRUPDQFH 1. INTRODUCTION ,Q¿QDQFHVWDQGDUGGHYLDWLRQLVUHIHUUHGWRDVDPHDVXUHRI³WRWDOULVN´LQWKDWLWLQFRUSRUDWHV ERWKWKHV\VWHPDWLFULVNDQGXQLTXHULVNRIDQLQYHVWPHQW7RXVWKHPRQLNHU³WRWDOULVNPHDVXUH´LV DELWRIDPLVQRPHULQWKDWVWDQGDUGGHYLDWLRQGRHVQRWFDSWXUHOLTXLGLW\ULVN3UHYLRXVUHVHDUFKHUV KDYHUHFRJQL]HGWKLVGH¿FLHQF\HVSHFLDOO\LQFDVHRIPHDVXULQJLQYHVWPHQWIXQGSHUIRUPDQFH &RUUHVSRQGLQJDXWKRU.DWDU]\QD3HUH]±,QVWLWXWHRI)LQDQFH'HSDUWPHQWRI,QYHVWPHQWDQG)LQDQFLDO0DUNHWV$O1LHSRGOHJáRĞFL 3R]QDĔHPDLONDWDU]\QDSHUH]#XHSR]QDQSOWHO DZȱŞȱȱŘŖŘŗȱȦȱDZȱŗŝȱȱŘŖŘŗȱȦȱDZȱŗŞȱȱŘŖŘŗȱȦȱȱDZȱřŖȱȱŘŖŘŗ
Richard Van Horne, Katarzyna Perez Journal of Banking and Financial Economics 2(16)2021, 91–103 DOI: 10.7172/2353-6845.jbfe.2021.2.5 92 92 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by/4.0/) E\WKH6KDUSHUDWLR6KDUSH7KH\KDYHSRLQWHGRXWWKDWVWDQGDUGGHYLDWLRQPD\EH XQGHUVWDWHGDQGWKH6KDUSHUDWLRWKHUHIRUHRYHUVWDWHGLQWKHSUHVHQFHRIOLTXLGLW\ULVNLQDIXQG¶V SRUWIROLR/RKDVVXJJHVWHGPHWKRGVIRUDGMXVWLQJWKH6KDUSHUDWLRWRWDNHOLTXLGLW\ULVN LQWRDFFRXQWDQG*HWPDQVN\HWDOKDYHIROORZHG/RLQWKLVE\LQYHVWLJDWLQJKHGJH IXQGVIRUZKLFKOLTXLGLW\LVSDUWLFXODUO\LPSRUWDQWULVNIDFWRU&/LHWDO6LHJPDQQ 6WHIDQRYD ,QWKLVVWXG\ZHSURSRVHDQLQWXLWLYHDQGVLPSOHPRGL¿FDWLRQWRWKH6KDUSHUDWLRWKDW LQWURGXFHVLQWRWKHFDOFXODWLRQDSUR[\IRUOLTXLGLW\ULVNZKLFKLVQRWGLUHFWO\FDSWXUHGLQWKH VWDQGDUGGHYLDWLRQPHDVXUH7KLVSUR[\LVDVHULDOFRUUHODWLRQRIIXQGUHWXUQV2XUPRGL¿FDWLRQ PHWKRGUHVXOWVLQDPHDVXUHWKDWZHFDOOD³OLTXLGLW\ULVNDGMXVWHGSHUIRUPDQFHUDWLR´/5$35 :HFDOFXODWH/5$35IRUKHGJHIXQGVDOLYHLQ±,QWXLWLYHO\WKLVPHDVXUHVKRXOG DOORZDEHWWHUDSSOHVWRDSSOHVFRPSDULVRQRIIXQGVH[KLELWLQJKLJKHUDVVXPHGOLTXLGLW\ULVNV ZLWKRWKHUIXQGVZKHUHOLTXLGLW\ULVNLVDEVHQWRUPRUHPXWHG:H¿QGWKDWLQDFHUWDLQJURXSRI KLJKHUOLTXLGLW\ULVNIXQGVLQRXUIXQGXQLYHUVHWKHUHLVDVWURQJO\SRVLWLYHDVVRFLDWLRQEHWZHHQ WKHOHYHORIOLTXLGLW\ULVNDQGWKHIXQG6KDUSHUDWLR:HDOVR¿QGWKDWRXU/5$35PD\EHDPRUH XVHIXOUHZDUGIRUULVNPHDVXUHWKDQWKH6KDUSHUDWLRLQWKDWWKH/5$35VHHPVWREHLQGHSHQGHQW RIWKHIXQG¶VOLTXLGLW\ULVNVRWKDWGL൵HUHQFHVLQ/5$35DFURVVWKHIXQGVPD\GHSHQGRQPRUH UHOHYDQWIRUFHVVXFKDVGL൵HUHQWLDOPDQDJHUVNLOORUH[SRVXUHWRPRUHXQXVXDOULVNVWKDWDUHKDUGHU WRLGHQWLI\PHDVXUHDQGLQWHQWLRQDOO\LQFRUSRUDWHLQWRDGLYHUVL¿HGSRUWIROLR7RFRQ¿UPRXU LQWXLWLRQZHFDOFXODWH$OSKDVIRUDOOWKHKHGJHIXQGVLQWKHGDWDEDVHXVLQJDIDFWRUHTXLOLEULXP PRGHOVLPLODUWRWKDWRI)XQJ+VLHK:H¿QGWKDWKLJKHUOLTXLGLW\ULVNIXQGVKDYH KLJKHUHVWLPDWHG$OSKDVLQWKHPRGHO7KLVVXJJHVWVWKDWWKHH[WUD$OSKDIRUWKLVJURXSRIIXQGV PD\EHDFRPSHQVDWLRQIRUDQHLJKWKULVNIDFWRUWKDWLVPLVVLQJIURPWKHIDFWRUPRGHOQDPHO\ DOLTXLGLW\ULVNIDFWRU :HKDYHRUJDQL]HGRXUVWXG\DVIROORZV,Q6HFWLRQZHUHYLHZWKHOLWHUDWXUHLQ6HFWLRQ ZHSUHVHQWWKHGDWDDQGGHVFULEHRXUPHWKRGVLQFOXGLQJRXUPRGHODQGRXUOLTXLGLW\ULVNIDFWRU LQ6HFWLRQZHSUHVHQWRXU¿QGLQJVDQGLQ6HFWLRQZHFRQFOXGH 2. LITERATURE REVIEW 7KHUHLVDUREXVWDQGKLVWRULFDOO\LPSRUWDQWOLWHUDWXUHUHODWHGWRSHUIRUPDQFHHYDOXDWLRQ DQGPHDVXUHPHQWRIKHGJHIXQGV$PRQJPDQ\W\SHVRIIXQGSHUIRUPDQFHPHDVXUHVWZRDUH WKHPRVWFRPPRQO\XWLOL]HG7KH¿UVWRQHLVWKH$OSKDFRH൶FLHQWSURSRVHGE\-HQVHQ GHYHORSHGE\)DPD)UHQFKDQGDGMXVWHGWRWKHKHGJHIXQGLQGXVWU\E\)XQJDQG+VLHK $OSKDPHDVXUHVWKHUHODWLRQVKLSEHWZHHQDIXQGUHWXUQDQGDVHWRIXQGLYHUVL¿DEOHULVN IDFWRUVWKDWLQÀXHQFHWKLVUHWXUQ%HFDXVHRILWVSURSHUWLHVWKLVPHDVXUHLVDVWDQGDUGLQDFDGHPLF UHVHDUFKRQKHGJHIXQGVHJ%DUUDVHWDO&KHQHWDO)XQJ+VLHK .RVRZVNLHWDO6WXO]7KHVHFRQGPHDVXUHRISDUWLFXODUSRSXODULW\LQSUDFWLFHLVWKH UHZDUGWRYDULDELOLW\UDWLRRI6KDUSH7KH6KDUSHUDWLRPHDVXUHVWKHUHODWLRQVKLSEHWZHHQ WKHPHDQDQGWKHVWDQGDUGGHYLDWLRQRIH[FHVVUHWXUQV,WLVRQHRIWKHEHVWNQRZQDQGZLGHO\ XVHGPHWULFVWRPHDVXUHDQGFRPSDUHLQYHVWPHQWSHUIRUPDQFH$XHU6FKXKPDFKHU)RU DORQJWLPHLWZDVWUHDWHGDVQRWDSSURSULDWHIRUKHGJHIXQGVEHFDXVHWKHRUHWLFDOO\LWZDVMXVWL¿HG WREHXWLOL]HGLQWKHFDVHRIQRUPDOO\GLVWULEXWHGH[FHVVUHWXUQVRUTXDGUDWLFLQYHVWRUSUHIHUHQFHV %URRNV.DW0DKGDYL=DNDPRXOLQH.RHNHEDNNHU0RUHUHFHQW¿QGLQJV RI6FKXKPDFKHU(OLQJSURYHWKDWWKH6KDUSHUDWLRKDVDGHFLVLRQWKHRUHWLF IRXQGDWLRQHYHQLQWKHFDVHRIDV\PPHWULFRUIDWWDLOHGH[FHVVUHWXUQVDQGWKXVLWLVDSSOLFDEOHIRU WKHSHUIRUPDQFHDQDO\VLVRIWKHKHGJHIXQGV$XHUDQG6FKXKPDFKHUH[SDQGWKHDQDO\VLV RIWKHVWDWLVWLFDOSURSHUWLHVRIWKH6KDUSHUDWLRDQGSURSRVHDGHTXDWHWHVWLQJWKDWVWUHQJWKHQWKH WKHRUHWLFDOSODXVLELOLW\RIWKH6KDUSHUDWLRDVDKHGJHIXQGSHUIRUPDQFHPHDVXUH
Richard Van Horne, Katarzyna Perez Journal of Banking and Financial Economics 2(16)2021, 91–103 DOI: 10.7172/2353-6845.jbfe.2021.2.5 93 93 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by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³LOOLTXLGLW\SUHPLXP´7KLVSUHPLXPLVLQYHVWLJDWHGE\UHVHDUFKHUVLQWZROHYHOV,QWKHSUHVHQW UHVHDUFKZHDUHIRFXVHGRQZKDWZHPLJKWFDOO³PLFUROHYHO´OLTXLGLW\ULVNDWWKHOHYHORIWKHIXQG DQGWKHIXQGSRUWIROLRWKDWLVDVVHWOLTXLGLW\2WKHUVRXUFHVRIOLTXLGLW\ULVNDUH³PDFUROHYHO´ ULVNVDQGZHKDYHLQGHHGVHHQVXFKULVNVLPSDFWWKHOLTXLGLW\RIKHGJHIXQGVDWWLPHVRIWKHPDUNHW VWUHVV7KH*OREDO)LQDQFLDO&ULVLVFRPHVWRPLQGRIFRXUVHDVGRHVWKH³GRXEOHZKDPP\´LQ $XJXVWRIWKH5XVVLDQUXEOHFULVLVDQGWKH/RQJ7HUP&DSLWDO0DQDJHPHQWGLVDVWHU7KHVH PDFUROHYHOOLTXLGLW\VKRFNVWHQGWRD൵HFWDOOKHGJHIXQGVPRUHRUOHVVDWWKHVDPHWLPH 7KHOLWHUDWXUHRQOLTXLGLW\ULVNDWWKH³PDFUROHYHO´IRFXVHVRQWKHH൵HFWRIV\VWHPLFOLTXLGLW\ VKRFNVWKDWLVDJJUHJDWHPDUNHWZLGHOLTXLGLW\ULVNDVDQXQGLYHUVL¿DEOHULVNIDFWRURQPDUNHW PLFURVWUXFWXUHDVSHFWVVXFKDVELGR൵HUVSUHDGVWUDGLQJYROXPHDQGSULFHLPSDFWDVZHOO DVFKDQJHVLQIXQGLQJ6HYHUDOVWXGLHVKDYHIRXQGWKDWV\VWHPLFOLTXLGLW\ULVNDFFRXQWVIRURU H[SODLQVDVLJQL¿FDQWSRUWLRQRIIXQG$OSKDHJ*LEVRQHWDORUWKDWWKHODUJHORVVHV H[SHULHQFHGGXULQJJOREDOOLTXLGLW\VKRFNVFRXQWHUDFWWKHJHQHUDOO\JRRGSHUIRUPDQFHRILOOLTXLG IXQGVLQFDOPHUPDUNHWV6DGNDDQG6DGND3UHYLRXVO\3DVWRUDQG6WDPEDXJK HPSOR\SUR[LHVIRUV\VWHPOLTXLGLW\ULVNVXFKDVELGR൵HUVSUHDGVDQGWUDGLQJYROXPHIRU VWRFNVWRUDQNDQGVRUWVWRFNVWRFUHDWHDQRLQYHVWPHQWORQJVKRUWOLTXLGLW\ULVNIDFWRU7KH\ ¿QGWKDWWKHDJJUHJDWHOLTXLGLW\ULVNPHDVXUHKHOSHGWRH[SODLQWKHFURVVVHFWLRQRIVWRFNUHWXUQV %LOOLRHWDO¿QGWKDWVRPHKHGJHIXQGVWUDWHJLHVSHUIRUPSDUWLFXODUO\SRRUO\GXULQJERXWV RI¿QDQFLDOGLVWUHVVGXHWRIXQGLQJSUREOHPVDQGLOOLTXLGDVVHWV $QRWKHUIRFXVRIWKHOLWHUDWXUHFRQQHFWHGWRWKHOLTXLGLW\ULVNDWWKH³PDFUROHYHO´LVRQZHOO RUJDQL]HGPDUNHWVIRUWKHXQGHUO\LQJVHFXULWLHVVXFKDVVWRFNH[FKDQJHVRURWKHUH[FKDQJHV ZKHUHELGVDQGR൵HUVDUHSRVWHGDQGZKHUHWKHSULFHGDWDLVWUDQVSDUHQWDQGWUDGLQJYROXPHVDUH DYDLODEOH,QVXFKPDUNHWVWKHUHVHDUFKHUVORRNIRUOLTXLGLW\WLPLQJDELOLW\RIKHGJHIXQGPDQDJHUV DQGWKH\¿QGLW&DRHWDORQWKHHTXLW\PDUNHW%/LHWDORQWKH¿[HGLQFRPH PDUNHWDQG/XRHWDODQG&K/LHWDORQWKHIRUHLJQH[FKDQJHPDUNHW<HWPDQ\ RIWKHKHGJHIXQGVWUDWHJLHVGHDOLQVHFXULWLHVWKDWGRQRWWUDGHRQWKRVHPDUNHWV$QGYLUWXDOO\QR VXFKKHGJHIXQGGLVFORVHVLWVSRUWIROLRKROGLQJVLQHQRXJKGHWDLOWRHQDEOHDQDQDO\VWWRDVVHVVWKH OLTXLGLW\RIWKHIXQGWKURXJKH[DPLQDWLRQRILWVKROGLQJV2QHRIWKHSRVVLELOLWLHVWRDVVHVVOLTXLGLW\ ULVNDWPRUH³PLFUROHYHO´DWWKHOHYHORIWKHLQGLYLGXDOIXQGLVWKHPRGHOSURSRVHGE\/R ZKRIRFXVHVRQWKH6KDUSHUDWLR+H¿QGVWKHYRODWLOLW\RIKROGLQJSHULRGUHWXUQVZKLFKVHUYHVDV WKHULVNPHDVXUHWREHXQGHUVWDWHGLQWKHFDVHRILOOLTXLGSRUWIROLRKROGLQJV/RHVWDEOLVKHV DIXQG¶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൶FLHQWLQDQ$5 VHULDOFRUUHODWLRQPRGHOWRVHUYHDVDSUR[\IRUDIXQG¶VOLTXLGLW\ULVN7KH\SRLQWRXWWKDWUHWXUQV VKRXOGEHVHULDOO\XQFRUUHODWHGLQDQLQIRUPDWLRQDOO\H൶FLHQWPDUNHW7KHSUHVHQFHRIVHULDOO\ DXWRFRUUHODWHGUHWXUQVFHUWDLQIXQGVWKHQWKH\WDNHDVDQLPSOLFDWLRQRIPDUNHWLQH൶FLHQF\
Richard Van Horne, Katarzyna Perez Journal of Banking and Financial Economics 2(16)2021, 91–103 DOI: 10.7172/2353-6845.jbfe.2021.2.5 94 94 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by/4.0/) DQGLOOLTXLGLW\*HWPDQVN\HWDO¿QGWKDWWKHSUHVHQFHRIVHULDOFRUUHODWLRQLQKHGJHIXQG UHWXUQVFDQEHFDXVHGE\WKUHHIDFWRUVWKHIXQGLQYHVWPHQWVWUDWHJ\DQGWKHQDWXUHRIDVVHWV LQWKHIXQGWKHPHWKRGRIPRQWKHQGSULFLQJDQGGHOLEHUDWH³VPRRWKLQJ´RIUHWXUQVE\ DIXQGPDQDJHU7KHVHIDFWRUVEHDUGLUHFWO\RQWKHOLTXLGLW\RIWKHIXQG¶VXQGHUO\LQJDVVHWVDQG WKHUHIRUHRIWKHIXQGLWVHOI*HQHUDOO\ODUJHFDSHTXLW\IXQGVVKRXOGKDYHORZOHYHOVRIVHULDO FRUUHODWLRQEHFDXVHWKH\DUHOLTXLGDQGHDV\WRSULFHVRWKHWHPSWDWLRQRIDIXQGPDQDJHUWR ³VPRRWK´KLVUHWXUQVLQWKDWW\SHRIKHGJHIXQGVLVVPDOO+RZHYHUWKHVWUDWHJLHVRIVPDOOFDS HTXLW\GLVWUHVVHGGHEW3,3(6RU¿[HGLQFRPHDUELWUDJHWHQGWRKDYHKLJKVHULDOFRUUHODWLRQ 7KHUHIRUHWKH\KDYHDJUHDWHUULVNRIGLVORFDWLRQDQGDODUJHQHJDWLYHSHUIRUPDQFHVXUSULVH)RU WKHVHW\SHVRIIXQGVWKHVWDQGDUGGHYLDWLRQPD\XQGHUVWDWHWKHDFWXDOULVNDQGWKH6KDUSHUDWLR PD\RYHUVWDWHWKHUHZDUGIRUULVNWUDGHR൵7RWKHH[WHQWWKDWDQDO\VWVUHO\KHDYLO\RQWKH6KDUSH UDWLRPHDVXUHLQWKHVHFLUFXPVWDQFHVLQWKHLULQYHVWPHQWGHFLVLRQPDNLQJWKH\PD\RYHUHVWLPDWH WKHGLYHUVL¿FDWLRQEHQH¿WRILQFOXGLQJVXFKDIXQGLQWKHLUSRUWIROLRV .KDQGDQLDQG/RDSSO\WKHDQDO\VLVRI*HWPDQVN\HWDOWRERWKKHGJHIXQGV DQGPXWXDOIXQGVDVZHOODVDUWL¿FLDOO\FUHDWHGSRUWIROLRVRIVWRFNV7KH\UDQNDQGVRUWWKHVH YDULRXVSRUWIROLRVE\WKHDXWRFRUUHODWLRQRIPRQWKO\UHWXUQVWRFUHDWHDQRLQYHVWPHQWORQJVKRUW OLTXLGLW\ULVNIDFWRU7KH\¿QGDSRVLWLYHUHODWLRQVKLSEHWZHHQHOHYDWHGOHYHOVRIVHULDOFRUUHODWLRQ DQGIXQGVZLWKORQJHUUHGHPSWLRQSHULRGVLHORQJHUORFNXSVDVZHOODVIXQGVZLWKLQYHVWPHQW VWUDWHJLHVNQRZQWREHPRUHLOOLTXLGVXFKDVVPDOOFDSVWRFNVHPHUJLQJPDUNHWVWRFNVDQG PRUWJDJHEDFNHGERQGV 2XULQWHUHVWLQWKLVUHVHDUFKLVWKHIXQGOLTXLGLW\ULVNDWWKH³PLFUROHYHO´ZKHUHGL൵HUHQW IXQGVDUHH[SRVHGWRGL൵HUHQWOHYHOVRIVXFKULVNDWGL൵HUHQWWLPHV:HIROORZ/RDQG *HWPDQVN\HWDODQGXVHVHULDOFRUUHODWLRQRIUHWXUQVDVDSUR[\RIWKHOLTXLGLW\ULVNDQG SURSRVHWKHOLTXLGLW\ULVNDGMXVWHGSHUIRUPDQFHUDWLR/5$35%\GRLQJWKDWZHDGGDEULFNWR WKHGLVFXVVLRQRQDGMXVWLQJ6KDUSHUDWLRZLWKWKHOLTXLGLW\ULVN%HFDXVHRIVLPSOLFLW\RXUPHDVXUH FRXOGEHHDVLO\XVHGWRUDQNKHGJHIXQGVE\WKH¿QDQFLDOLQIRUPDWLRQV\VWHPVDQGLQYHVWPHQW DGYLVRUVZKR±WKHQ±FRXOGSUHVHQWWKHPWRWKHKHGJHIXQGLQYHVWRUV 3. DATA AND METHODOLOGY :HXVHWKH%DUFOD\+HGJHGDWDEDVHRI³OLYLQJ´IXQGVZLWKPRQWKO\UHWXUQVWKURXJK'HFHPEHU 2XU¿UVWVWHSLVWRHOLPLQDWHGXSOLFDWHIXQGV 7RGRWKLVZHWRRNWKHPRQWKO\UHWXUQV DFURVVDOOWKHIXQGVLQWKHGDWDEDVHIRUWKHSHULRG-XO\WR-XQHDQGZHFDOFXODWHGWKH SDLUZLVHFRUUHODWLRQFRH൶FLHQWV)RUDQ\5!ZHGHHPHGWKLVWREHDGXSOLFDWHIXQG3HU WKLVSURFHGXUHZHUHGXFHGWKHIXQGGDWDEDVHIURPWRIXQGV1H[WZHGHFLGHGRQ DQDQDO\VLVSHULRGRI-DQXDU\WKURXJK'HFHPEHUDVWKHSHULRGRIWKHG\QDPLFZRUOG FDSLWDOPDUNHWJURZWKZKHUHWKHQXPEHURQORQJ³OLYLQJ´KHGJHIXQGVZDVKLJKDQGWKHUHOLDEOH GDWDRQWKHPDYDLODEOH:HIRXQGWKHUHWREHIXQGVIRUWKH-DQXDU\WKURXJK'HFHPEHU WLPHSHULRG)RUHDFKIXQGIRUWKHQLQH\HDUSHULRGZHFDOFXODWHGWKHIROORZLQJPHWULFV XVLQJPRQWKO\KROGLQJSHULRGUHWXUQGDWD&$*56WDQGDUG'HYLDWLRQ5LVNIUHHUDWH6KDUSH 5DWLR $5%HWD±DRQHSHULRGODJJHGVHULDOFRUUHODWLRQPHDVXUHWVWDWDQGSYDOXHIRUWKH $5%HWDDQG/5$35±RXUOLTXLGLW\ULVNDGMXVWHGSHUIRUPDQFHUDWLR :HIROORZ/RDQG*HWPDQVN\HWDODQGXVHVHULDOFRUUHODWLRQRIIXQGUHWXUQVDV WKHSUR[\IRUOLTXLGLW\ULVN/RPHDVXUHVVHULDOFRUUHODWLRQZLWKWKHFRUUHODWLRQFRH൶FLHQW $GXSOLFDWHIXQGLVDIXQGWKDWLVDQLQGLYLGXDOOHJDOHQWLW\EXWLWVKDUHVWKHVDPHPDQDJHUWKHVDPHVWUDWHJ\DQGHLWKHUWKHVDPHRUDYHU\ VLPLODUSRUWIROLRZLWKDQRWKHUIXQG :HWRRNWKHUHWXUQVIRUWKH86HTXLW\PDUNHWEHQFKPDUNLQGH[DVZHOODVWKHULVNIUHHUDWHGDWDIURPWKHGDWDOLEUDU\RI'DYLG)UHQFKRI)DPD )UHQFKIDPHIRXQGDWWKHZHEVLWHKWWSVPEDWXFNGDUWPRXWKHGXSDJHVIDFXOW\NHQIUHQFKGDWDBOLEUDU\KWPO
Richard Van Horne, Katarzyna Perez Journal of Banking and Financial Economics 2(16)2021, 91–103 DOI: 10.7172/2353-6845.jbfe.2021.2.5 95 95 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by/4.0/) *HWPDQVN\HWDOGRWKDWZLWKWKHUHJUHVVLRQHVWLPDWHGVORSHFRH൶FLHQWȕiTRIDVLPSOHRQH SHULRGODJJHGDXWRFRUUHODWLRQ$5SURFHVVPRGHO r r e it iT iT it it1 \b= + + - (T ZKHUHr it ±LVDUHWXUQRIDIXQGi LQWLPHtr it± LV±LVDUHWXUQRIDIXQGi LQWLPHt± iT \ ȕ iT DUHFRH൶FLHQWVDQGeitLVDVWDQGDUGHUURURI(T%RWKPHDVXUHVRIVHULDOFRUUHODWLRQDUH HVVHQWLDOO\WKHVDPH :HPRGLI\WKHVWDQGDUG6KDUSHUDWLRPHDVXUHVXFKWKDWZHGLYLGHWKH VWDQGDUGGHYLDWLRQLQWKHGHQRPLQDWRUE\PLQXVWKHUHJUHVVLRQHVWLPDWHGFRH൶FLHQWIRUWKH $5SURFHVVVHULDOFRUUHODWLRQIRUDVLQJOHIXQG2XU³OLTXLGLW\ULVNDGMXVWHGSHUIRUPDQFHUDWLR´ /5$35LVFDOFXODWHGDVIROORZV LRAPR R R 1 i i f iAR 1 v b = - - _ ^ i h (T ZKHUHȕARiLVWKHFRH൶FLHQWȕiTIURP(T)XUWKHULQWKLVDUWLFOHZHUHIHUWRLWDVWKH$5 %HWD2XUPHWKRGIRUDGMXVWLQJWKH6KDUSHUDWLRLVVLPSOHDFFHVVLEOHWRWKHDQDO\VWDQGHDV\WR GHSOR\IRUSUDFWLFDOXVH7RJLYHDQH[DPSOHFRQVLGHUWZRKHGJHIXQGVIURPRXUXQLYHUVHIRUWKH SHULRGWKURXJKVHH7DEOH Table 1 ([DPSOHRI&KDQJHG5DQN2UGHULQJRI)XQGVXQGHU/5$35YHUVXVVWDQGDUG6KDUSH5DWLR Fund Annual Return Risk free rate Ann Std Dev Sharpe Ratio AR(1) Beta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³'RHVDIXQG¶VVHULDOFRUUHODWLRQWKDWLVDSUR[\IRUOLTXLGLW\ ULVNLQÀXHQFHDIXQG¶V6KDUSHUDWLR"´2UVWDWHGVRPHZKDWGL൵HUHQWO\³'RHVDKLJK6KDUSH UDWLRHYLGHQFHWKHIXQG¶VVXSHULRUSHUIRUPDQFHUHODWLYHWRRWKHUIXQGVRULVLWUHÀHFWLYHRI FRPSHQVDWLRQIRUEHDULQJOLTXLGLW\ULVN"´:HUHJUHVVLQWXUQWKHIXQG/5$35VWDQGDUG6KDUSH UDWLRDQG/RDGMXVWHG6KDUSHUDWLRRQWKHIXQG$5%HWDWRDGGUHVVWKHTXHVWLRQ7KH UHJUHVVLRQRXWSXWVDUHSUHVHQWHGIRUWKHKLJK$5%HWDIXQGVDQGIRUWKHIXQG XQLYHUVHDVZHOODVIRUWKHIXQGVZLWKSRVLWLYHDQGQHJDWLYHVHULDOFRUUHODWLRQ±ZHGRWKHODWWHU LQRUGHUWRFRQ¿UPRXULQWXLWLRQWKDWDGMXVWPHQWWRWKH6KDUSHUDWLRLVEHVWFRQ¿QHGWRIXQGV 7KHIRUPXODIRU%HWDLV ,cov Beta r r x x x y )v v = ^ h DQGWKHIRUPXODIRUFRUUHODWLRQLV ,cov R r r x x x y )v v = ^ h 7KHRQO\GL൵HUHQFHLVLQWKHGHQRPLQDWRU UHSODFLQJıxZLWKıy6LQFHxDQGyDUHHVVHQWLDOO\WKHVDPHGDWDODJJHGRQHPRQWKVRWKDWn±RIWKHQGDWDSRLQWVDUHLQFRPPRQWKHVWDQGDUG GHYLDWLRQRIxLVYHU\FORVHWRWKHVWDQGDUGGHYLDWLRQRIyLQFDVHVZKHUHQHLWKHUWKH¿UVWDQGQRUODVWPRQWKVRIWKHUHWXUQVWLPHVHULHVLVDQH[WUHPH UHWXUQ
Richard Van Horne, Katarzyna Perez Journal of Banking and Financial Economics 2(16)2021, 91–103 DOI: 10.7172/2353-6845.jbfe.2021.2.5 96 96 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by/4.0/) ZLWKSRVLWLYHVHULDOFRUUHODWLRQDQGWKDWQHJDWLYHVHULDOFRUUHODWLRQIXQGVKDUERUQRSDUWLFXODU OLTXLGLW\ULVN )LQDOO\ZHH[DPLQHWKHDVVRFLDWLRQEHWZHHQWKH$5%HWDDQGDKHGJHIXQG$OSKD:HDUH PRWLYDWHGE\RXU¿QGLQJVWKDW6KDUSHUDWLRVDUHRYHUHVWLPDWHGGXHWRH[FOXVLRQRIOLTXLGLW\ULVN IURPWKH6KDUSHUDWLRULVNPHDVXUH:HK\SRWKHVL]HWKDWDIXQG$OSKDLVVLPLODUO\RYHUVWDWHGLQWKH SUHVHQFHRIKHLJKWHQHGOLTXLGLW\ULVNLQWKHFDVHZKHUHWKH$OSKDLVHVWLPDWHGLQDQHTXLOLEULXP PRGHOWKDWH[FOXGHVOLTXLGLW\ULVNDVDQLGHQWL¿HGDQGPRGHOHGULVNIDFWRU±ZKLFKGHVFULEHVMXVW DERXWHYHU\HTXLOLEULXPPRGHOLQXVHLQKHGJHIXQGSHUIRUPDQFHHYDOXDWLRQ:HHPSOR\RXU RZQIDFWRUHTXLOLEULXPPRGHO±ZKHUHOLTXLGLW\ULVNLVQRWDPRQJWKHULVNIDFWRUV±WRHVWLPDWH DIXQG$OSKDIRUDOORIWKHIXQGVLQWKHXQLYHUVH:HUHJUHVVHGWKHUHVXOWLQJIXQG$OSKDRQ IXQG$5%HWDWRDVVHVVZKHWKHUIXQG$OSKDLVGULYHQE\OLTXLGLW\ULVNDQGLVRYHUVWDWHGLQWKH SUHVHQFHRIOLTXLGLW\ULVN2XUIDFWRUPRGHOLVEDVHGRQWKH&DUKDUWIDFWRUPRGHO&DUKDUW DQGWKHH[WHQVLYHZRUNRI)XQJDQG+VLHKRYHUWKHPDQ\\HDUVWKDWUHVXOWHGLQWKHLU LGHQWL¿FDWLRQRIXVHIXOULVNIDFWRUV)XQJ+VLHK2XUVHYHQIDFWRUVDUHPDUNHWULVN VL]HYDOXHPRPHQWXPLQWHUHVWUDWHULVNFUHGLWVSUHDGULVNDQGHPHUJLQJPDUNHWHTXLW\ULVNDV UHSUHVHQWHGLQWKLVPRGHO r rf RMR F y SMB HML MO M y it t iT iT tiT tiT tiT t 1 2 3 4 \b b b b b b - = + + + + + ^ ^ ^ ^ h h h h (T F y rUTS Baa Bonds M y rUTS EM Equity R e 1010 t iT tiT tiT f tit5 6 7 b b b- + + + + - + ^ ^ ^ h h h h h 7KHUHVXOWVRIDOOWKHVWHSVRIRXUUHVHDUFKDUHSUHVHQWHGLQWKHQH[W6HFWLRQ 4. RESULTS 7KHDYHUDJHYDOXHVRIWKHVWDQGDUG6KDUSHUDWLRVRXU/5$SHUIRUPDQFHUDWLRDQGWKH/R DGMXVWHG6KDUSHUDWLRIRUWKHKHGJHIXQGVLQRXUXQLYHUVHDUHSUHVHQWHGLQ7DEOH)LUVW ZHIRFXVRQWKHKHGJHIXQGVZKHUHWKH$5VHULDOFRUUHODWLRQFRH൶FLHQWLVSRVLWLYHDQG VLJQL¿FDQWDWWKHFRQ¿GHQFHOHYHO7KHPHDVXUHVRI$5%HWDIRUWKHVHIXQGVUDQJH IURPDORZRIWRDKLJKRI/RRNLQJDWWKHDYHUDJHVIRUWKRVHKHGJHIXQGVZLWK KLJKHUDVVXPHGOLTXLGLW\ULVNZHVHHDIHZQRWHZRUWK\DVSHFWV)LUVWWKHKHGJHIXQGVWKDWKDYH VLJQL¿FDQWVHULDOFRUUHODWLRQRQDYHUDJHKDYHPXFKKLJKHU6KDUSHUDWLRVWKDQWKHDYHUDJH6KDUSH UDWLRDFURVVWKHIXQGXQLYHUVHYHUVXV6HFRQGWKHKHGJHIXQGVZLWK KLJKHUDVVXPHGOHYHOVRIOLTXLGLW\ULVNVXUUHQGHUPXFKPRUHRIWKHLU6KDUSHUDWLRLQGHVFHQGLQJ WRZDUGWKH/5$SHUIRUPDQFHUDWLRGURSSLQJIURPWRWKHDYHUDJHIXQGLQWKH IXQGXQLYHUVHVXUUHQGHUHGRILWV6KDUSHUDWLRLQWKHSURFHVVRILQFRUSRUDWLQJOLTXLGLW\ ULVNLQWRWKHUHZDUGIRUSHUIRUPDQFHPHDVXUHIURPWR7KLUGRXU/5$SHUIRUPDQFH UDWLRJLYHVDERXWWKHVDPHUHVXOWDVWKH/RPHWKRGZKLOHEHLQJVLPSOHUWRFDOFXODWHDQG EHLQJHDVLHUWRXQGHUVWDQGLQWXLWLYHO\
Richard Van Horne, Katarzyna Perez Journal of Banking and Financial Economics 2(16)2021, 91–103 DOI: 10.7172/2353-6845.jbfe.2021.2.5 97 97 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by/4.0/) Table 2 &RPSDULVRQRI6KDUSH5DWLRVDQG/5$35V 1 2 3 4 5 6 \HDUSHULRG ± $YHUDJH $5VHULDO FRUUHODWLRQ FRH൶FLHQW $YHUDJH 6KDUSH 5DWLR YDOXH $YHUDJH /5$35 YDOXH GHFUHDVHIURP 6KDUSH5DWLRWR /5$35 ± $YHUDJH /RDGMXVWHG 6KDUSHUDWLRYDOXH GHFUHDVHIURP 6KDUSH5DWLRWR /RDGMXVWHG ± +HGJH)XQGV ZLWKSRVLWLYH$5 +HGJH)XQGV 6RXUFHRZQFDOFXODWLRQV $GGLWLRQDOO\ZKHUHDVWKH/RPHWKRGDOORZVIRUDQLQFUHDVHLQ6KDUSHUDWLRIRUDIXQG ZLWKQHJDWLYHRQHSHULRGODJJHGFRUUHODWLRQZHGRQRWFUHGLWQHJDWLYH$5IXQGVZLWKDKLJKHU 6KDUSHUDWLRVLPSO\IRUWKHIDFWWKDWWKHIXQG¶V$5PHDVXUHLVHYHQORZHUWKDQDOHYHOWKDW DOUHDG\LQGLFDWHV³OLWWOHRUQR´OLTXLGLW\ULVN7KHUHDUHLQWHUHVWLQJSKHQRPHQDZLWKQHJDWLYH VHULDOFRUUHODWLRQIXQGVWKDWPHULWDWWHQWLRQ7KH$5IRUWKH63YDULHVRYHUWLPHEXWLV VRPHWLPHVLQWKHUDQJHRIDERXWWRIRUORQJSHULRGVRIWLPH:KLOHLQWLPHVRIFULVLV WKHUHPD\EHVKRUWOLYHGERXWVRISRRUOLTXLGLW\RULOOLTXLGLW\LQWKH86ODUJHFDSHTXLW\PDUNHW LQJHQHUDOZHZRXOGDUJXHWKDWZHFDQFODVVLI\WKH86ODUJHFDSHTXLW\PDUNHWDV³OLTXLG´±DQG LWLVFHUWDLQO\OLTXLGZKHQFRQVLGHUHGLQUHODWLRQWRPDQDJHGIXQGVVXFKDVKHGJHIXQGV6R LIDKHGJHIXQGKDVDQ$5%HWDPHDVXUHWKDWLVRQSDUZLWKRUVPDOOHUWKDQWKH$5%HWD PHDVXUHIRUWKHRYHUDOO86ODUJHFDSHTXLW\PDUNHWZHZRXOGQRWVXJJHVWWKDWZHFDQLQIHUIURP WKHIXQG¶VVHULDOFRUUHODWLRQPHDVXUHWKDWIXQGKDUERUVSDUWLFXODUOLTXLGLW\ULVN6RLIIXQGVZLWK $5PHDVXUHVRIVHULDOFRUUHODWLRQRIWRFDQEHFKDUDFWHUL]HGDV³OLWWOHRUQROLTXLGLW\ ULVN´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
Richard Van Horne, Katarzyna Perez Journal of Banking and Financial Economics 2(16)2021, 91–103 DOI: 10.7172/2353-6845.jbfe.2021.2.5 98 98 © 2021 Authors. This is an open access article distributed under the Creative Commons BY 4.0 license (https://creativecommons.org/licenses/by/4.0/) Table 3 5HVXOWVIRU5HJUHVVLQJ6KDUSH5DWLR/5$35IDFWRUIXQG$OSKDDQG/R6KDUSH5DWLRRQ)XQG$5%HWD Dependent Variable Independent Variable Universe R^2 Regression &RH൶FLHQW (loading) p-value Intercept p-value 6KDUSH5DWLR $5%HWD KLJKOLTXLGLW\ULVNIXQGV $5%HWD (QWLUHXQLYHUVHIXQGV $5%HWD $5%HWD!IXQGV $5%HWD $5%HWDIXQGV /5$35 $5%HWD KLJKOLTXLGLW\ULVNIXQGV $5%HWD (QWLUHXQLYHUVHIXQGV $5%HWD $5%HWD!IXQGV $5%HWD $5%HWDIXQGV /R 6KDUSH5DWLR $5%HWD KLJKOLTXLGLW\ULVNIXQGV $5%HWD (QWLUHXQLYHUVHIXQGV $5%HWD $5%HWD!IXQGV $5%HWD $5%HWDIXQGV )DFWRU )XQG$OSKD $5%HWD KLJKOLTXLGLW\ULVNIXQGV $5%HWD (QWLUHXQLYHUVHIXQGV $5%HWD $5%HWD!IXQGV $5%HWD $5%HWDIXQGV 6RXUFHRZQFDOFXODWLRQV 7KHVHRXWSXWVXJJHVWVHYHUDO¿QGLQJV)LUVW7DEOHURZIRUWKHKLJKOLTXLGLW\ULVN IXQGVLQWKHXQLYHUVHDQLQFUHDVHLQ$5%HWDRIIRULQVWDQFHIURPVD\WRLV DVVRFLDWHGZLWKDQLQFUHDVHLQ6KDUSHUDWLRRI$QGDFURVVWKHHQWLUHXQLYHUVHRIIXQGV 7DEOHURZDQLQFUHDVHLQ$5%HWDRILVDVVRFLDWHGZLWKDLQFUHDVHLQ6KDUSH UDWLR7KHVH¿QGLQJVDUHFRQVLVWHQWZLWKRXULQWXLWLRQWKDWVWDQGDUGGHYLDWLRQDVDPHDVXUHRI ³WRWDOULVN´±DQGDVWKHULVNPHDVXUHXVHGLQWKHVWDQGDUG6KDUSHUDWLR±GRHVQRWFDSWXUHOLTXLGLW\ ULVNLQWKDW6KDUSHUDWLRVDUHVHQVLWLYHWRDQGSRVLWLYHO\UHODWHGWRLQFUHDVHVLQDVVXPHGIXQG OLTXLGLW\ULVN )XUWKHUZHSHUIRUPHGVLPLODUUHJUHVVLRQVGLYLGLQJWKHXQLYHUVHLQWRWZRJURXSVSRVLWLYH VHULDOFRUUHODWLRQIXQGV7DEOHURZDQGQHJDWLYHVHULDOFRUUHODWLRQIXQGV7DEOHURZ7KH UHVXOWVVHHPWRFRQ¿UPRXULQWXLWLRQ)RUQHJDWLYHVHULDOFRUUHODWLRQIXQGVWKHUHLVQRSDUWLFXODU DVVRFLDWLRQRIWKH6KDUSHUDWLRZLWKWKHOLTXLGLW\ULVNDVLQGLFDWHGE\WKHKLJKSYDOXHIRUWKHVORSH FRH൶FLHQWDQGE\WKHKLJKOHYHORI6LJQL¿FDQFH)IRUWKHPRGHORYHUDOO$VIRUWKHSRVLWLYHVHULDO FRUUHODWLRQIXQGVRYHURIZKLFKKDYH$5%HWDVWKDWDUHQRWVWDWLVWLFDOO\VLJQL¿FDQWDWWKH FRQ¿GHQFHOHYHODLQFUHDVHLQVHULDOFRUUHODWLRQLVDVVRFLDWHGZLWKDLQFUHDVHLQ 6KDUSHUDWLR$QGWKHPRGHORYHUDOOLVVLJQL¿FDQW 2XUH[SHFWDWLRQLVWKDWWKHPRGL¿FDWLRQWRWKH6KDUSHUDWLRVWKDWZHSHUIRUPHGZKHQZH WUDQVIRUPHGWKHIXQG6KDUSHUDWLRVLQWRIXQG/5$35VZLOOUHVXOWLQDEHWWHUPHDVXUHRIUHZDUG IRUULVNWKDQWKHRULJLQDO6KDUSHUDWLRVZKLFKDUHRYHUVWDWHGGXHWROLTXLGLW\ULVNEHLQJDEVHQWIURP WKH6KDUSHUDWLRULVNPHDVXUH2QHDUHDLQZKLFKZHFDQWHVWLIWKH/5$35LVDQLPSURYHPHQW