Aggregate Alpha in the Hedge Fund Industry: A Further Look at Best Ideas

Please visit our research portal for context on the study: https://www.epsilonmgmt.com/research/hedge-fund-best-ideas

Repository containing all files for the following paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3586138

Files are organized by ‘Best Idea’ Method. Methodologies for Methods 1 – 9 are detailed on Page 8 (Section 4.2) of the paper linked to above.

Each Method is further grouped into 31 sub-analyses. Sub-analyses reproduce Cohen, Sili, Polk Best Idea nested methodologies detailed in their paper (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1364827) which were unpublished in ours. These include regression analysis from Tables 2 – 13 of their paper.

We also include of ‘Best minus Rest’ and ‘Rest Idea’ portfolios detailed in sections 5.3.3 and 5.3.4 of our paper (pages 15 – 18).

Methods

• Method 1
  • Market Tilt
• Method 2
  • Variance-adjusted Market Tilt
• Method 3
  • Intra-Cap Weight Tilt
• Method 4
  • Variance-adjusted Intra-Cap Weight Tilt
• Method 5
  • Mean-Variance Tilt
• Method 6
  • Cap-Weight Adjusted Mean-Variance Tilt
• Method 7
  • Intra-Cap Weight Adjusted Mean-Variance Tilt
• Method 8
  • Raw Portfolio Weight
• Method 9
  • Asset Weighted HFU Tilt

File Structure

• Title and Imports
• Fetch holdings, benchmark, returns information
• Calculate Best Ideas with respect to tilt and additional filters
• Back-test the portfolio and report cumulative / yearly performance
• Fetch Factor Models (Carhart Four, Fama French Five, Q Factor Model)
• Present Regressions
  • Full Time Period
    • Carhart Four, Fama French Five, Q Factor Model
      • Unadjusted, Newey West (9 lag), Newey West (18 lag)
  • Pre-Crisis
    • Carhart Four, Fama French Five, Q Factor Model
      • Unadjusted, Newey West (9 lag), Newey West (18 lag)
  • Post-Crisis
    • Carhart Four, Fama French Five, Q Factor Model
      • Unadjusted, Newey West (9 lag), Newey West (18 lag)

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