TY - JOUR T1 - Hedge Fund Index Returns JF - Special Issues SP - 111 LP - 117 VL - 2002 IS - 1 AU - Anne-Sophie Van Royen Y1 - 2002/09/21 UR - https://pm-research.com/content/2002/1/111.abstract N2 - Hedge fund managers generally claim to share one common characteristic: a low correlation with long-only traditional asset classes. The author examines this claim by analyzing conditional correlations between hedge fund return indexes and a conventional bond-stock reference portfolio, using a measure free from conditioning bias, “exceedance correlations.” If hedge fund style indexes take advantage of both rising and falling markets, we should observe a stable pattern of conditional correlations over both negative and positive returns. The results in fact suggest otherwise. Fixed-Income Arbitrage and Statistical Arbitrage display a certain degree of independence from the market. For Event-Driven, Fixed-Income, Convertible Arbitrage, and Distressed Securities, there is a disconnection from market conditions, but when markets go up, not when they fall. Correlations between hedge fund styles and the market are far from close to zero under all market conditions. ER -