Published in:Bank of Italy Temi di Discussione (Working Paper) ; No. 831
Extent:
1 Online-Ressource (53 p)
Language:
English
DOI:
10.2139/ssrn.2004404
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 14, 2011 erstellt
Description:
Standard risk metrics tend to underestimate the true risks of hedge funds because of serial correlation in the reported returns. Getmansky, Lo, and Makarov (2004) derive mean, variance, Sharpe ratio, and beta formulae adjusted for serial correlation. Following their lead, we derive adjusted downside and global measures of individual and systemic risks. We distinguish between normally and fat tailed distributed returns and show that adjustment is particularly relevant for downside risk measures in the case of fat tails. A hedge fund case study reveals that the unadjusted risk measures considerably underestimate the true extent of individual and systemic risks.The appendices for this paper are available at the following URL: "http://ssrn.com/abstract=2467834" http://ssrn.com/abstract=2467834