We examine linear correlation and tail dependence between market neutral hedge funds and the market portfolio conditional on the financial cycle. We document that the low correlation between these funds and the S&P 500 consists of a negative correlation during bear periods and a positive one...

We examine linear correlation and tail dependence between market neutral hedge funds and the market portfolio conditional on the financial cycle. We document that the low correlation between these funds and the S&P 500 consists of a negative correlation during bear periods and a positive one...

The subprime crisis was quite damaging for hedge funds. Using the local projection method (Jordà 2004, 2005, 2009), we forecast the dynamic responses of the betas of hedge fund strategies to macroeconomic and financial shocks-especially volatility and illiquidity shocks-over the subprime crisis...

We explore a new dimension of the dependence of hedge fund returns with the market portfolio by examining linear correlation and tail dependence conditional on the financial cycle. Using a large sample of hedge funds that are considered "market neutral", we document that the low correlation of...