Application of Enhanced Index Fund and Equity Market Neutral Hedge Fund Strategies in Taiwan
Date Issued
2004
Date
2004
Author(s)
Lin, Yi-Wei
DOI
en-US
Abstract
In this study we explore strategies of equity market neutral hedge funds and enhanced index funds. From the past decade of Taiwan stock market, we choose three value-style variables and three growth-style variables by fundamental analysis to form undervalued and overvalued portfolios, and then construct equity market neutral hedge funds by long / short strategy to neutralize systematic risk. We can find obviously that performance of equity market neutral portfolio is much superior to that of only long strategy portfolio. Equity market neutral hedge funds emphasize especially on pursuing consistent return despite fluctuation of the market.
Moreover, we intend to develop strategies of enhanced index funds which not only can track but beat index. Two of many approaches are used in this study: futures plus cash enhancement and futures plus equity market neutral. We take 10% capital to buy index futures and the remaining 90% to hold fixed income security or adopt equity market neutral investing. The main idea of both approaches is to replicate market return pattern by index futures and utilize the leverage characteristics of futures to reach the goal of enhancing index. Although there is no hedge fund or enhanced index fund in Taiwan due to regulation, it is quite possible that they would be permitted and become popular in the near future.
Moreover, we intend to develop strategies of enhanced index funds which not only can track but beat index. Two of many approaches are used in this study: futures plus cash enhancement and futures plus equity market neutral. We take 10% capital to buy index futures and the remaining 90% to hold fixed income security or adopt equity market neutral investing. The main idea of both approaches is to replicate market return pattern by index futures and utilize the leverage characteristics of futures to reach the goal of enhancing index. Although there is no hedge fund or enhanced index fund in Taiwan due to regulation, it is quite possible that they would be permitted and become popular in the near future.
Subjects
加值指數型基金
市場中立
避險基金
Enhanced Index Fund
Equity Market Neutral
Hedge Fund
Type
thesis
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