Hedge Fund Classification

The principal idea behind classifying hedge funds is the ability to convert a set of hedge funds returns into groups so as to be able to visualise clear clustering and style group boundaries. For the fund of hedge fund (FoHF) manager this is indispensable – since clustering and classification are ob...

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Bibliographic Details
Published inHedge Fund Modelling and Analysis Using MATLAB pp. 137 - 153
Main Authors Darbyshire, Paul, Hampton, David
Format Book Chapter
LanguageEnglish
Published United Kingdom John Wiley & Sons, Incorporated 2014
Wiley
John Wiley & Sons, Ltd
Subjects
dendrograms
FINANCE & ACCOUNTING
financial instrument building blocks
hedge fund clusters
hedge funds
MATLAB
style groups
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Summary:The principal idea behind classifying hedge funds is the ability to convert a set of hedge funds returns into groups so as to be able to visualise clear clustering and style group boundaries. For the fund of hedge fund (FoHF) manager this is indispensable – since clustering and classification are observable ways of scientifically studying hedge fund return data so that an empirical set of estimates can be produced for further hypothesis testing where necessary. The dendrogram is the industry standard method of analysis of the natural hierarchy or taxonomy of a data set. This chapter allows us to apply the tools available in MATLAB to delve deeper into the structure of hedge fund returns and gain a better understanding of their grouping and classification. It shows how financial instrument building blocks are traded, and the number of funds that primarily trade them.
ISBN:9781119967378
1119967376
DOI:10.1002/9781118905029.ch6