Reconsidering Funds of Hedge Funds

Chapter 15

Forecasting Funds of Hedge Funds Performance

A Markov Regime-Switching Approach

Szabolcs Blazsek, School of Business, Universidad Francisco Marroquín, Guatemala

Chapter Outline

15.1. Introduction

15.2. Data

15.2.1. FoHFs and the Hedge Fund Database

15.2.2. Data Description

15.2.3. FoHFs Return Drivers

15.3. Forecasting Models

15.3.1. AR(p) Model

15.3.2. AR(p)-GARCH(1,1) Model

15.3.3. MS-AR(p) Model

15.3.4. MS-AR(p)-GARCH(1,1) Model

15.3.5. MS-AR(p)-MS-GARCH(1,1) Model

15.4. Results

15.4.1. Out-of-sample Forecasting Procedure and Model Diagnostics

15.4.2. Out-of-Sample Forecasting Precision

15.4.3. Out-of-Sample Forecast Accuracy Test for FoHFs

15.4.4. In-Sample FoHFs Regime Determinants

Conclusion

Appendix

References

15.1 Introduction ...