Application Of Resilient Long-Short Strategies For Taiwanese Hedge Funds
Main Article Content
Keywords
Tactical Style Allocation, Style Timing, Style Rotation, Value Stocks, Momentum Stocks, Active and Passive Portfolio Management, Value Investing, Momentum Investing, Taiwan Stock Exchange, TAIEX, Hedge Fund Strategies
Abstract
This paper proposes a 4-step approach in developing resilient long-short hedge fund strategies for stocks traded on the Taiwan Stock Exchange. The two hedge fund strategies developed in this research, namely the Hybrid Neutral Fund and the Defense Fund, outperform their respective benchmarks on a risk-adjusted basis over the examination period from 01 January 2000 to 31 December 2011. In addition, both hedge fund strategies efficiently mitigate the drawdowns during turbulent times. The total returns on the TAIEX Index (the market proxy) is found to be a mean-variance inefficient portfolio over the examination period. The Hybrid Neutral Fund that takes the advantage from both the traditional market neutral fund and the Defense Fund is found to achieve the highest risk-adjusted performance over the examination period.