Hedge fund pricing and model uncertainty

Vrontos, S., Vrontos, I.D. and Giamouridis, D. 2008. Hedge fund pricing and model uncertainty. Journal of Banking and Finance. 32 (5), pp. 741-753.

TitleHedge fund pricing and model uncertainty
AuthorsVrontos, S., Vrontos, I.D. and Giamouridis, D.
Abstract

This article uses Bayesian model averaging to study model uncertainty in hedge fund pricing. We show how to incorporate heteroscedasticity, thus, we develop a framework that jointly accounts for model uncertainty and heteroscedasticity. Relevant risk factors are identified and compared with those selected through standard model selection techniques. The analysis reveals that a model selection strategy that accounts for model uncertainty in hedge fund pricing regressions can be superior in estimation/inference. We explore potential impacts of our approach by analysing individual funds and show that they can be economically important.

JournalJournal of Banking and Finance
Journal citation32 (5), pp. 741-753
ISSN0378-4266
YearMay 2008
PublisherElsevier
Digital Object Identifier (DOI)doi:10.1016/j.jbankfin.2007.05.011
Publication dates
PublishedMay 2008

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