HEDGE FUND REPLICATION STRATEGIES: THE GLOBAL MACRO CASE

This paper performs and analyzes hedge fund replication strategies using liquid exchange-traded instruments to build linear multi-factor models (“clones”) that mimic Hedge Funds returns. First, we follow Hasanhodzic and Lo (2006) six-factor model, using Barclay Hedge Indexes monthly returns for the period of January 1997 to August 2017 on seventeen hedge fund strategies. Next, we introduce variations and new propositions to the model in order to obtain closer risk-return characteristics, focusing on one particular hedge fund strategy: Global Macro. Finally, we use these results to base our conclusion and propose applications for this method.Our findings promote the use of shorter month period in rolling-windows approach and monthly rebalancing strategy for a faster reaction and adaptation to market conditions. Also, it suggests the addition of a strategic-specific factor to obtain better expected-return replications. These findings are particularly relevant to institutional investors that need diversification and could benefit from this asset class exposure, but many times are restricted from investing in hedge funds due to their high fee structure, illiquidity, and opaque tactics

Testing for persistence in US mutual funds’ performance: a Bayesian dynamic panel model

We provide a Bayesian panel model to consider persistence in US funds’ performance while we tackle the important problem of errors in variables. Our modelling departs from prior strong assumptions such as error terms across funds being independent. In fact, we provide a novel, general Bayesian model for (dynamic) panel data that is stable across different priors as reported from the mapping of the prior to the posterior of the Bayesian baseline model with the adoption of different priors. We demonstrate that our model detects previously undocumented striking variability in terms of performance and persistence across funds categories and over time, and in particular through the financial crisis. The reported stochastic volatility exhibits a rising trend as early as 2003-2004 and could act as an early warning of future crisis

Artificial Intelligence in Asset Management

Artificial intelligence (AI) has grown in presence in asset management and has revolutionized the sector in many ways

Combining SOA and BPM Technologies for Cross-System Process Automation

This paper summarizes the results of an industry case study that introduced a cross-system business process automation solution based on a combination of SOA and BPM standard technologies (i.e., BPMN, BPEL, WSDL). Besides discussing major weaknesses of the existing, custom-built, solution and comparing them against experiences with the developed prototype, the paper presents a course of action for transforming the current solution into the proposed solution. This includes a general approach, consisting of four distinct steps, as well as specific action items that are to be performed for every step. The discussion also covers language and tool support and challenges arising from the transformation

The role of visual adaptation in cichlid fish speciation

D. Shane Wright (1) , Ole Seehausen (2), Ton G.G. Groothuis (1), Martine E. Maan (1) (1) University of Groningen; GELIFES; EGDB(2) Department of Fish Ecology & Evolution, EAWAG Centre for Ecology, Evolution and Biogeochemistry, Kastanienbaum AND Institute of Ecology and Evolution, Aquatic Ecology, University of Bern.In less than 15,000 years, Lake Victoria cichlid fishes have radiated into as many as 500 different species. Ecological and sexual sel ection are thought to contribute to this ongoing speciation process, but genetic differentiation remains low. However, recent work in visual pigment genes, opsins, has shown more diversity. Unlike neighboring Lakes Malawi and Tanganyika, Lake Victoria is highly turbid, resulting in a long wavelength shift in the light spectrum with increasing depth, providing an environmental gradient for exploring divergent coevolution in sensory systems and colour signals via sensory drive. Pundamilia pundamila and Pundamilia nyererei are two sympatric species found at rocky islands across southern portions of Lake Victoria, differing in male colouration and the depth they reside. Previous work has shown species differentiation in colour discrimination, corresponding to divergent female preferences for conspecific male colouration. A mechanistic link between colour vision and preference would provide a rapid route to reproductive isolation between divergently adapting populations. This link is tested by experimental manip ulation of colour vision - raising both species and their hybrids under light conditions mimicking shallow and deep habitats. We quantify the expression of retinal opsins and test behaviours important for speciation: mate choice, habitat preference, and fo raging performance