Here are the original seven hedge fund risk factors used in our
paper: "Hedge
Fund Benchmarks: A Risk-Based Approach" to capture the risk of well-diversified
hedge fund portfolios.
Trend-Following Risk Factors (3):
-Bond Trend-Following Factor
-Currency Trend-Following Factor
-Commodity Trend-Following Factor
These trend-following factors are constructed based on the article
by
William Fung & David A. Hsieh, "The Risk in Hedge Fund Strategies:
Theory and Evidence from Trend Followers," Review of Financial
Studies,
14 (2001), 313-341.
Download: click here to download
excel file for Jan 1994-Mar 2009.
[These risk factors will be updated quarterly, with a 6 month lag.]
Equity-oriented Risk Factors (2):
-Equity Market Factor
The Standard & Poors 500 index monthly total
return [Datastream code: S&PCOMP(RI)]
-The Size Spread Factor
In the original 2001 paper, we used Wilshire
Small Cap 1750 - Wilshire Large Cap 750
monthly return.
Currently, we are using Russell 2000 index monthly
total return -
Standard & Poors 500 monthly total return. [Datastream code:
FRUSS2L(RI), S&PCOMP(RI)]
Bond-oriented Risk Factors (2):
-The Bond Market Factor
The monthly change in the 10-year treasury constant
maturity yield (month end-to-month end),
available at the Board of Governors of the Federal
Reserve System.
Download site:
http://www.federalreserve.gov/releases/h15/data/Business_day/H15_TCMNOM_Y10.txt
-The Credit Spread Factor
The monthly change in the Moody's Baa yield less
10-year treasury constant maturity yield (month end-to-month end),
available at the Board of Governors of the Federal
Reserve System.
Download site for Moody's Baa yield:
http://www.federalreserve.gov/releases/h15/data/Business_day/H15_BAA_NA.txt
Download site for 10-year treasury constant maturity
yield:
http://www.federalreserve.gov/releases/h15/data/Business_day/H15_TCMNOM_Y10.txt
Recently, we have added an eighth factor to this model: