Higher-moment risk exposures in hedge funds

G.M.B.J. Hübner*, M.M.A.G. Lambert, N. Papageorgiou

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


This paper singles out the key roles of US equity skewness and kurtosis in the hedge fund return generating process. We propose a conditional higher-moment model with location, trading, and higher-moment factors to describe the dynamics of the equity hedge, event-driven, relative value, and fund of funds styles. If the volatility, skewness, and kurtosis implied in US options are used by fund managers as instruments to anticipate market movements, managers should adjust their market exposure in response to variations in these moments. We indeed show that higher-moment premia improve the conditional asset pricing model across all hedge fund styles.

Data source: HFR, Datastream
Original languageEnglish
Pages (from-to)236-264
JournalEuropean Financial Management
Issue number2
Publication statusPublished - 1 Jan 2015

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