Investing in Hedge Funds

A Guide to Measuring Risk and Return Characteristics


  • Turan Bali, Georgetown University, Washington DC, USA
  • Yigit Atilgan, Sabanci University, Turkey
  • Ozgur Demirtas, Baruch College CUNY, New York, NY, USA

This book will present a comprehensive view of the risk characteristics, risk-adjusted performances, and risk exposures of various hedge fund indices. It will distinguish itself from other books and journal articles by focusing solely on hedge fund indices and emphasizing tail risk as a predictor of hedge fund index returns. The three chapters in this short book have not been previously published.
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Upper-division undergraduates, graduate students, researchers, and professionals worldwide working on financial investments, and on hedge funds in particular.


Book information

  • Published: July 2013
  • ISBN: 978-0-12-404731-0


"Bali,…Atilgan,…and  Demirtas…present an overview of how hedge funds have performed over the past 20 years. They discuss present risk and return characteristics for a wide range of hedge fund indices; fund databases and their biases; changes in performance in the recent global financial crisis; and linkages between index returns and macroeconomic factors."--Reference & Research Book News, December 2013

Table of Contents

1. Introduction

    1.1 What Are Hedge Funds?

      1.2 The History and the Future

        1.3 Academic Perspective

          1.4 The Aim of the Book

            2. Hedge Fund Strategies

            2.1 Event Driven Strategies

            2.2 Equity Hedge Strategies

            2.3 Relative Value Strategies

            2.4 Global Macro Strategies

            2.5 Other Strategies

            2.6 Fund of Hedge Funds

            3. Hedge Fund Databases, Biases and Indices

            3.1 Hedge Fund Data Biases

            3.2 Hedge Fund Databases and Indices

            3.3 Hedge Fund Index Return Distributions

            3.3.1 Dow Jones Credit Suisse Hedge Fund Indices

            3.3.2 Hedge Fund Research Hedge Fund Indices

            4. Risk-Adjusted Performances of Hedge Fund Indices

            4.1 Sharpe Ratio

            4.2 Sortino Ratio

            4.3 Return to VaR Ratio

            4.4 Calmar Ratio

            5. Determinants of Hedge Fund Index Returns

            5.1 Predictability of Hedge Fund Index Returns by Moments of the Return Distribution

            5.2 Predictability of Hedge Fund Index Returns by Exposures to Macroeconomic Risk Factors