Risk measurement and investment myopia in hedge fund management

Xun Li, Zhenyu Wu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

2 Citations (Scopus)

Abstract

Lo (2001) surveys the literature on risk management for hedge funds, and recommends a dynamic and transparent risk measurement for the evolutionary hedge fund industry by citing Albert Einstein's comments. This study is to explore the feasibility and advantages of adopting a dynamic absolute-deviation risk measurement in hedge fund management. It does not only provide an optimal asset allocation strategy both analytically and numerically in a dynamic mean-absolute deviation (DMAD) setting for hedge fund managers, but also contributes to mitigation of potential investment myopia problems in their risktaking behaviors. It sheds light on risk management and investor-fund manager agency conflicts in the hedge fund industry and adds to the literature on portfolio selection and optimal asset allocation.
Original languageEnglish
Pages (from-to)1-33
Number of pages33
JournalAsia-Pacific Journal of Financial Studies
Volume38
Issue number1
DOIs
Publication statusPublished - 1 Feb 2009

Keywords

  • Absolute deviation
  • Agency conflict
  • Hedge fund
  • Investment myopia
  • Risk management

ASJC Scopus subject areas

  • Finance

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