|Title||Hedge fund pricing and model uncertainty|
|Authors||Vrontos, S., Vrontos, I.D. and Giamouridis, D.|
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.
|Journal||Journal of Banking and Finance|
|Journal citation||32 (5), pp. 741-753|
|Digital Object Identifier (DOI)||https://doi.org/10.1016/j.jbankfin.2007.05.011|