Fig. 2

Local projection of a VIX shock on hedge fund strategies’ betas over the subprime crisis. Notes: The impulse response functions corresponding to the linear LP are built using the Jordà’s (2004, 2005, 2009) algorithm provided by Eren Ocakverdi, consultant at Yapy Kredi. The local projection of a beta strategy is performed over the subprime crisis (2007Q3–2009Q4). We also provide the linear VAR estimated over the whole sample period selected as benchmark. The confidence interval of the LP impulses, computed at the threshold of 95%, is in dotted lines. As explained in the paper, our model comprises five endogenous shocks, placed in the following order to perform the Cholesky factorization (Sims 1980) required to build structural shocks: GDP growth, term spread, credit spread, beta (own shock), and VIX. As usual, these variables are ordered by increasing level of endogeneity. This order relies on the conventional information criteria: Akaike and Schwartz criteria. The long-short credit strategy is excluded since its IRF is not enough significant