← Search

Journal of Banking & Finance Vol. 32 No. 5 2008

Hedge fund pricing and model uncertainty

Spyridon D. Vrontos1; Ioannis D. Vrontos2; Daniel Giamouridis3,2

1 University of the Aegean · 2 Athens University of Economics and Business · 3 City, University of London

Abstract

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.

DOI
10.1016/j.jbankfin.2007.05.011
Volume
32
Issue
5
Pages
741-753
Language
en
Sources
openalex crossref bibtex:phds-export.bib

Cite