Made available in DSpace on 2016-04-25T16:45:05Z (GMT). No. of bitstreams: 1 Mauricio Jose Afonso Martinho.pdf: 6139321 bytes, checksum: 2745099dc0a4277d9077c3f6007eb513 (MD5) Previous issue date: 2005-05-16 / nenhum / During the last six years, the exchange rate in Brazil has been presenting a high volatility, mainly due to the end of exchange rate fixing, in the beginning of 1999, and due to the consequently implementation of a policy which provided the exchange rate prices flexibility. Within this context, companies that hold assets and liabilities linked to the exchange rate variation, and do not have a hedge policy, will be liable to the exchange rate risk exposure, that is, their financial results tend to present straight dependence to the exchange rate variation. One of the manners to reduce the exchange rate risk exposure is the utilization of derivatives instruments, which internal market negotiations also presented a meaningful increase, during the period mentioned above. The applying of these deals in the exchange rate risk management is the main objective of these research. Thus, it was looked for a methodology which considers quantitative and qualitative variables aiming to confirm the effectiveness of the derivatives deals in reducing the exposure to the exchange rate volatility. To achieve this objective, it was developed a research that can be divided in two main steps. Firstly, it was obtained, by a bibliographic search, the mainly characteristics of the derivative instruments linked to exchange rate, considering the national market, as well as the financial risk management importance in companies that present exchange rate risk exposure. Secondly, it was selected a case study research which considers all hedge transactions done by an automotive company, performing in the internal market, and also the assets and liabilities that motivate these deals as from 1998, period in which the company began to present an exposure increase to the exchange rate volatility. At the end, the analysis of the hedge transactions results combined to the products of the assets and liabilities, object of the protections, demonstrated that the objectives defined in the beginning of the deals by the company were attained, meaning that the derivative instruments revealed themselves as efficient tools to the company exchange rate risk management / Nos últimos 6 anos, a taxa de câmbio no Brasil vem apresentando elevada volatilidade, decorrente principalmente do fim da fixação da paridade cambial, a partir do início de 1999, e da conseqüente implementação de uma política de flexibilização da oscilação dos preços das moedas. Dentro desse contexto, empresas que detenham ativos e passivos atrelados à variação da taxa de câmbio, e não possuam políticas de hedge, ficam sujeitas ao risco de exposição cambial, isto é, seus resultados operacionais e financeiros tendem a apresentar forte dependência do comportamento das taxas de câmbio. Uma das formas de redução do risco de exposição às flutuações das paridades cambiais é a utilização de instrumentos de derivativos, cujas negociações no mercado nacional, durante o período citado acima, também apresentaram um crescimento expressivo. A aplicação dessas operações na gestão de risco cambial é o objetivo maior deste trabalho. Procurou-se aqui, uma metodologia que considerou variáveis quantitativas e qualitativas visando comprovar a eficiência das transações de derivativos na redução da exposição à volatilidade da taxa de câmbio. Para alcançar este objetivo, foi desenvolvida uma pesquisa que pode ser dividida em duas etapas principais. Na primeira buscou-se o levantamento, através de pesquisa bibliográfica, das principais características dos instrumentos de derivativos cambiais, considerando o mercado nacional, assim como da importância da gestão do risco financeiro nas empresas que apresentem exposição cambial. A segunda etapa, foi dedicada ao estudo de caso que levou em consideração a análise conjunta de todas as operações de hedge realizadas por uma companhia do setor automotivo e atuante no mercado nacional, assim como dos ativos e passivos motivadores dessas transações, a partir do ano de 1998, período em que a mesma empresa passou a ficar mais exposta à volatilidade cambial. Por fim, a análise dos resultados das transações de hedge combinada ao produto dos ativos e passivos, objetos de proteção, demonstrou que os objetivos definidos pela empresa, no início das operações, foram atingidos, ou seja, os instrumentos de derivativos revelaram-se como ferramentas eficientes para a gestão do risco cambial da companhia

Some commentators attribute the success of certain hedge fund activism events to “wolf pack” activism, the support offered by other investors, many of whom are thought to accumulate stakes in the target firms before the activists’ campaigns are publicly disclosed. This paper investigates wolf-pack activism by considering the following questions: Is there any evidence of wolf-pack formation? Is the wolf pack formed intentionally (by the lead activist) or does it result from independent activity by other investors? Does the presence of a wolf pack improve the activist’s ability to achieve its stated objectives? First, I find that investors other than the lead activist do in fact accumulate significant share-holdings before public disclosure of activists’ campaigns, a result consistent with wolf-pack formation. Second, these share accumulations are more likely to be mustered by the lead activist rather than occurring spontaneously. Notably, for example, the other investors are more likely to be those who had a prior trading relationship with the lead activist. Third, the presence of a wolf pack is associated with a greater likelihood that the activist will achieve its stated objectives (e.g., will obtain board seats) and higher future stock returns over the duration of the campaign.

This thesis examines the degree to which alternative funds deviate from their style-benchmark and how this is related to past performance and fund size, and how it impacts future risk and returns. Additionally the thesis examines how security selection and market timing skills differ across varying degrees of deviation from the benchmark. The thesis uses data for hedge funds, funds of funds, and CTA funds from the Center for International Securities and Derivatives Markets and employs fund???s tracking error relative to their style-benchmark to estimate the level of drift. The style-benchmarks used are the median return for all reporting funds that follow a particular style and funds are assigned a benchmark based on their self-reported style. First, this thesis documents statistically significant differences in the tracking errors of portfolios of funds with the highest tracking error versus funds with the lowest tracking error, implying that some managers drift from their self-reported style-benchmarks. Second, funds??? benchmark-inconsistency is less severe in the case of funds that have a regulatory obligation to disclose their performance, suggesting that the absence of regulation fosters an environment where managers can be more flexible with their investment approach. Third, the tendency to drift from the benchmark is most prevalent amongst funds with superior past performance as well as small funds. Fourth, future total portfolio risk increases as funds display more benchmarkinconsistency, suggesting that managers adopt riskier strategies as they attempt to enhance returns. Fifth, the thesis demonstrates that CTA funds that display drift from their benchmark produce higher absolute and relative returns in subsequent periods regardless of the direction of the general market. In contrast, the findings show for hedge funds and funds of funds, benchmark-inconsistent funds are likely to outperform in bull markets and underperform in bear markets. Finally, this thesis shows that more benchmark-consistent managers have better security selection skill. The main contribution of this thesis is in identifying the group of hedge funds, funds of funds, and CTA funds that are likely to deviate from their self-reported style-benchmark and the risk-return consequences of such deviations. The findings have implications for investors and regulators.

This thesis examines the degree to which alternative funds deviate from their style-benchmark and how this is related to past performance and fund size, and how it impacts future risk and returns. Additionally the thesis examines how security selection and market timing skills differ across varying degrees of deviation from the benchmark. The thesis uses data for hedge funds, funds of funds, and CTA funds from the Center for International Securities and Derivatives Markets and employs fund???s tracking error relative to their style-benchmark to estimate the level of drift. The style-benchmarks used are the median return for all reporting funds that follow a particular style and funds are assigned a benchmark based on their self-reported style. First, this thesis documents statistically significant differences in the tracking errors of portfolios of funds with the highest tracking error versus funds with the lowest tracking error, implying that some managers drift from their self-reported style-benchmarks. Second, funds??? benchmark-inconsistency is less severe in the case of funds that have a regulatory obligation to disclose their performance, suggesting that the absence of regulation fosters an environment where managers can be more flexible with their investment approach. Third, the tendency to drift from the benchmark is most prevalent amongst funds with superior past performance as well as small funds. Fourth, future total portfolio risk increases as funds display more benchmarkinconsistency, suggesting that managers adopt riskier strategies as they attempt to enhance returns. Fifth, the thesis demonstrates that CTA funds that display drift from their benchmark produce higher absolute and relative returns in subsequent periods regardless of the direction of the general market. In contrast, the findings show for hedge funds and funds of funds, benchmark-inconsistent funds are likely to outperform in bull markets and underperform in bear markets. Finally, this thesis shows that more benchmark-consistent managers have better security selection skill. The main contribution of this thesis is in identifying the group of hedge funds, funds of funds, and CTA funds that are likely to deviate from their self-reported style-benchmark and the risk-return consequences of such deviations. The findings have implications for investors and regulators.

This thesis examines the degree to which alternative funds deviate from their style-benchmark and how this is related to past performance and fund size, and how it impacts future risk and returns. Additionally the thesis examines how security selection and market timing skills differ across varying degrees of deviation from the benchmark. The thesis uses data for hedge funds, funds of funds, and CTA funds from the Center for International Securities and Derivatives Markets and employs fund???s tracking error relative to their style-benchmark to estimate the level of drift. The style-benchmarks used are the median return for all reporting funds that follow a particular style and funds are assigned a benchmark based on their self-reported style. First, this thesis documents statistically significant differences in the tracking errors of portfolios of funds with the highest tracking error versus funds with the lowest tracking error, implying that some managers drift from their self-reported style-benchmarks. Second, funds??? benchmark-inconsistency is less severe in the case of funds that have a regulatory obligation to disclose their performance, suggesting that the absence of regulation fosters an environment where managers can be more flexible with their investment approach. Third, the tendency to drift from the benchmark is most prevalent amongst funds with superior past performance as well as small funds. Fourth, future total portfolio risk increases as funds display more benchmarkinconsistency, suggesting that managers adopt riskier strategies as they attempt to enhance returns. Fifth, the thesis demonstrates that CTA funds that display drift from their benchmark produce higher absolute and relative returns in subsequent periods regardless of the direction of the general market. In contrast, the findings show for hedge funds and funds of funds, benchmark-inconsistent funds are likely to outperform in bull markets and underperform in bear markets. Finally, this thesis shows that more benchmark-consistent managers have better security selection skill. The main contribution of this thesis is in identifying the group of hedge funds, funds of funds, and CTA funds that are likely to deviate from their self-reported style-benchmark and the risk-return consequences of such deviations. The findings have implications for investors and regulators.

<p>Reading the daily financial news, it becomes quite obvious that hedge funds are receiving huge attention by financial analysts and politicians. Many people fear the influence of hedge funds on single companies as well as on the global economy.</p><p>This study does not judge the behavior of hedge funds. Instead, it focuses on the nature of hedge funds and their mystique image. Especially the common view of their market neutral performance is of interest, which is theoretically achieved through the use of derivatives and short positions. In this thesis the feature of market neutrality is investigated in depth, since it can improve the overall performance of investors’ portfolios in bull as well as in bear markets through diversification effects.</p><p>Therefore the hedge funds and their environment, the capital markets, are examined from an academically point of view by emphasizing on the following research questions:</p><p>1. Are hedge funds performing market neutral in bull and bear markets?</p><p>2. To what extent should they be included in optimal risky portfolios according to Modern Portfolio Theory and advanced performance measurement tools, considering their degree of market neutrality?</p><p>This study is based on extensive knowledge of financial and econometric theories. Capital market theories, modern portfolio theory, hedge fund data and econometric knowledge about time series analysis build the basis for further investigations and are necessary to understand the characteristics of hedge funds and hedge fund data.</p><p>In order to be able to deal with the shortcomings of hedge fund data, an analytical framework for the preparation of data is created that enables the authors to start with the analysis of these questions. The framework is applicable to all kinds of hedge funds presented in this thesis and enables the reader to test further hedge fund classes by himself.</p><p>In a quantitative study the created framework is applied to 2160 hedge funds of Barclays Hedge Fund Database, which builds the basis for analyzing market neutrality. Further input for the portfolio optimization consists of 19 hedge fund indices, which were provided by the Greenwich Alternative Investment Hedge Fund Database and 4 benchmark indices for the stock and bond market.</p><p>The analysis consists of two different parts. For the first research question various correlation and return matrices are constructed, which shall provide information about market neutrality of hedge funds. A correlation matrix also serves as important input for the portfolio analysis and therefore builds the basis for the analysis of the second research question. This shall provide some fundamental recommendations about the weighting of diverse hedge fund classes in optimal risky portfolios.</p><p>The conducted analysis demonstrated clearly the following findings:</p><p>1. Market neutrality has to be rejected for most hedge fund strategies. It is only attainable through strategies, which focus more on arbitrage and/or the bond market and therefore seems to be more a by-product than an actually provoked feature.</p><p>2. Only two strategies, equity short and convertible arbitrage, managed to beat the benchmark and to improve the overall performance of the portfolio when taking the specific return distribution of hedge funds into account.</p>

Reading the daily financial news, it becomes quite obvious that hedge funds are receiving huge attention by financial analysts and politicians. Many people fear the influence of hedge funds on single companies as well as on the global economy. This study does not judge the behavior of hedge funds. Instead, it focuses on the nature of hedge funds and their mystique image. Especially the common view of their market neutral performance is of interest, which is theoretically achieved through the use of derivatives and short positions. In this thesis the feature of market neutrality is investigated in depth, since it can improve the overall performance of investors’ portfolios in bull as well as in bear markets through diversification effects. Therefore the hedge funds and their environment, the capital markets, are examined from an academically point of view by emphasizing on the following research questions: 1. Are hedge funds performing market neutral in bull and bear markets? 2. To what extent should they be included in optimal risky portfolios according to Modern Portfolio Theory and advanced performance measurement tools, considering their degree of market neutrality? This study is based on extensive knowledge of financial and econometric theories. Capital market theories, modern portfolio theory, hedge fund data and econometric knowledge about time series analysis build the basis for further investigations and are necessary to understand the characteristics of hedge funds and hedge fund data. In order to be able to deal with the shortcomings of hedge fund data, an analytical framework for the preparation of data is created that enables the authors to start with the analysis of these questions. The framework is applicable to all kinds of hedge funds presented in this thesis and enables the reader to test further hedge fund classes by himself. In a quantitative study the created framework is applied to 2160 hedge funds of Barclays Hedge Fund Database, which builds the basis for analyzing market neutrality. Further input for the portfolio optimization consists of 19 hedge fund indices, which were provided by the Greenwich Alternative Investment Hedge Fund Database and 4 benchmark indices for the stock and bond market. The analysis consists of two different parts. For the first research question various correlation and return matrices are constructed, which shall provide information about market neutrality of hedge funds. A correlation matrix also serves as important input for the portfolio analysis and therefore builds the basis for the analysis of the second research question. This shall provide some fundamental recommendations about the weighting of diverse hedge fund classes in optimal risky portfolios. The conducted analysis demonstrated clearly the following findings: 1. Market neutrality has to be rejected for most hedge fund strategies. It is only attainable through strategies, which focus more on arbitrage and/or the bond market and therefore seems to be more a by-product than an actually provoked feature. 2. Only two strategies, equity short and convertible arbitrage, managed to beat the benchmark and to improve the overall performance of the portfolio when taking the specific return distribution of hedge funds into account.

The purpose of this study is to analyze Swedish hedge funds in terms of pursued investment strategies, risks and returns. The study deals with a large number of quantitative data and delimitations were used to obtain a sample that better fulfills the purpose of this paper. The time frame chosen for increas-ing validity and reliability was almost four years. Furthermore, the study uses secondary data due to difficulties and costs as-sociated with obtaining primary data though this is not consi-dered as lowering the quality of the study. The theory section starts by presenting the differences between hedge funds and mutual funds and then focusing on different hedge fund strategies, risks associated with hedge funds and fi-nally risk and return measurements. This section provides an overview for the empirical findings and analysis. In the empirical findings and analysis, statistical calculations of and Analysis the risk measurements standard deviation, Sharpe ratio, track-ing error and correlation are conducted for the sample. The re-sults are related to the hedge funds strategies. Later on the strategies are weighted against each other. Finally, all strategies are compared to OMXS to find the investors‟ most appropriate investment structure. After categorizing the different hedge funds with respect to pursued strategies, the result shows how there are clear dispari-ties in risk and returns for the different strategies. We found indications of a significant relationship between high return and high risk as well as between low return and low risk.

This paper explores the economic rationales underpinning potential hedge fund regulation, and reviews the arguments about why rules aimed to mitigate systemic risk may be economically efficient. The paper presents a limited definition of systemic risk, and proposes that an international macro-prudential supervisory body be set up for the Ontario, U.S. and U.K. markets to collect systemically important information about hedge funds and to recommend policy changes in light of this information. The paper also reviews the proposed regulatory reforms in the United States that will apply to hedge funds, and argues that while helpful, such regulations are sub-optimal because they do not consider certain important characteristics of systemic risk.

This paper explores the economic rationales underpinning potential hedge fund regulation, and reviews the arguments about why rules aimed to mitigate systemic risk may be economically efficient. The paper presents a limited definition of systemic risk, and proposes that an international macro-prudential supervisory body be set up for the Ontario, U.S. and U.K. markets to collect systemically important information about hedge funds and to recommend policy changes in light of this information. The paper also reviews the proposed regulatory reforms in the United States that will apply to hedge funds, and argues that while helpful, such regulations are sub-optimal because they do not consider certain important characteristics of systemic risk.