Market neutral funds are commonly advertised as alternative investments offering returns which are uncorrelated with the broad market. Utilizing recent advances in financial econometrics we demonstrate that constructing market (beta) neutral funds by standard forecasting methods is often very...

This paper explores the gamma trading, timing and managerial skills of individual hedge funds across categories. We replicate the non-linear payoffs of hedge funds with traded options, with the option features being endogenously defined in our replication model. On top of providing a flexible...

Stock and option markets can at times reflect differing information. We identify three reasons for the presence of these periods of 'disagreement' between the cash and derivatives markets: 1) high volatility and noise trading; 2) high level of risk aversion; 3) speculation versus hedging trades....

This paper demonstrates that the forecasted CAPM beta of momentum portfolios explains a large portion of the return, ranging from 40% to 60% for stock level momentum, and 30% to 50% for industry level momentum. Beta forecasts are from a realized beta estimator using daily returns over the prior...

Motivated by empirical evidence of the asymmetry in the relationship between equity market return and volatility, where returns and conditional volatility are negatively correlated, we develop an approach that targets constant volatility in equity market portfolios. This volatility timing...