Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
960073 | Journal of Financial Economics | 2012 | 21 Pages |
Abstract
We study the common equity and equity option positions of hedge fund investment advisors over the 1999–2006 period. We find that hedge funds' stock positions predict future returns and that option positions predict both volatility and returns on the underlying stock. A quarterly tracking portfolio of stocks based on publicly observable hedge fund option holdings earns abnormal returns of 1.55% through the end of the quarter. Net of fees, hedge funds using options deliver higher benchmark-adjusted portfolio returns and lower risk than nonusers. The results suggest that hedge fund positions reflect significant timing and selectivity skill.
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Accounting
Authors
George O. Aragon, J. Spencer Martin,