Examine the monthly hedge fund indices data in from Jan 1994 to April 2016 available in HWK1_Data.xlsx A.) Compute the following statistics:
(1) Annualized Return; (2) Annualized Standard Deviation; (3) Sharpe Ratio; (4) Skew; (5) Kurtosis; (6) Sortino Ratio, (7) Calmar Ratio, (8) Jensen's Alpha, (9)* Fama-French'sAlpha 3-factors and 5-factors, (10)* Carhart'sAlpha, and (11)* Omega Ratio (make assumptions when necessary)
• B.) Compute Beta-in-the-Tails for (only monthly data) for all strategies. Which has the most severe tail-risk? Why? Note you will need excess market returns available here:
• C.) Compute the correlation across strategies, what is the two highest/lowest correlated strategies, why?
D.) Construct your "best" fund of hedge funds with (1) Static Weights (e.g. equally-weighted) and (2) Dynamic Weights, re-compute statistics as in A.) for your two portfolios. Is a portfolio of Hedge Funds better than single hedge funds? (Assume no t-costs, no frictions)
E.) Where are your hidden-risks in your portfolios?
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