What Hedge Funds Really Do: An Introduction to Portfolio Management (Philip J. Romero; Tucker Balch, 2014)

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  • Major hedge fund strategies: equity, arbitrage, momentum or direction, event-driven
  • Evaluate hedge fund: return (compound annual growth rate CAGR), return vs. benchmark, risk (sharpe ratio)
  • Good gauge: capital asset pricing model CAPM and efficient market hypothesis (EMH)
  • CAPM alpha: company’s performance but collectively stocks can’t beat the market as they are the market, counterbalance; beta: volatility relative to the overall market; correlation: negative, no visible or positive relationship


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