IDEAS home Printed from https://ideas.repec.org/p/sin/wpaper/16-a006.html
   My bibliography  Save this paper

Can Investing in Hedge Funds Improve Efficiency for Economically Important Investors?

Author

Abstract

The purpose of this paper is to examine the performance of hedge funds from the efficient diversification point of view for economically important investors, which is defined as in Tsetlin et al. (2015). We adopt the generalized almost second-degree stochastic dominance (GASSD) rule proposed by Tsetlin et al. (2015). The rule includes second-degree stochastic dominance as a special case and is a consensus rule for all economically important investors. We establish statistical estimations and tests for the GASSD efficiency of a given portfolio relative to all possible portfolios formed from a given set of assets. We find that for all economically important investors, adding hedge funds to a diversified portfolio can improve efficiency. The results explain the popularity of hedge funds in practice. JEL Classification: D80, D81

Suggested Citation

  • Yu-Chin Hsu & Rachel J. Huang & Larry Y. Tzeng & Christine W. Wang, 2016. "Can Investing in Hedge Funds Improve Efficiency for Economically Important Investors?," IEAS Working Paper : academic research 16-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    • Handle: RePEc:sin:wpaper:16-a006
    as

    Download full text from publisher

    File URL: https://www.econ.sinica.edu.tw/~econ/pdfPaper/16-A006.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    almost stochastic dominance; portfolio efficiency; hedge funds;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sin:wpaper:16-a006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: HsiaoyunLiu (email available below). General contact details of provider: https://edirc.repec.org/data/sinictw.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.