Tracking market and non-traditional sources of risks in procyclical and countercyclical hedge fund strategies under extreme scenarios: a nonlinear VAR approach

Racicot, François-Éric; Théoret, Raymond

doi:10.1186/s40854-021-00316-3

Financial Innovation

Table 3 Link between the betas of hedge fund strategies and GDP growth

From: Tracking market and non-traditional sources of risks in procyclical and countercyclical hedge fund strategies under extreme scenarios: a nonlinear VAR approach

	GDP growth								Adjusted
	t	t − 1	t − 2	t − 3	t − 4	t − 5	t-6	Sum of lags	R²
General index	0.762	0.168	− 0.212	− 0.379	− 0.333	− 0.074	0.399	0.331	0.93
	2.51	1.14	− 1.46	− 2.22	− 2.19	− 0.52	1.44
Convertibles	0.492	− 0.311	− 0.584	− 0.328	0.458			− 0.273	0.95
	1.06	− 1.24	− 1.82	− 1.35	1.05
Distressed securities	0.399	− 0.222	− 0.591	− 0.708	− 0.573	− 0.187	0.451	− 1.431	0.96
	1.23	− 1.46	− 3.73	− 3.78	− 3.47	− 1.15	1.38
Equity market neutral	0.481	− 0.018	− 0.239	− 0.182	0.153			0.195	0.96
	3.01	− 0.19	− 2.14	− 2.05	0.94
Event driven	1.003	0.148	− 0.379	− 0.579	− 0.451	0.005	0.789	0.535	0.95
	2.60	0.77	− 2.01	− 2.64	− 2.27	0.03	2.25
Fixed income	0.010	− 0.613	− 0.717	− 0.302	0.633			− 0.989	0.96
	0.03	− 3.11	− 2.76	− 1.48	1.67
Futures	0.195	− 0.053	− 0.203	− 0.256	− 0.212	− 0.071	0.167	− 0.434	0.96
	0.93	− 0.52	− 1.91	− 2.07	− 1.98	− 0.70	0.80
Growth	1.921	0.175	− 0.720	− 0.763	0.045			0.658	0.95
	2.73	0.43	− 1.45	− 2.00	0.06
Long-short credit	0.228	− 0.118	− 0.304	− 0.330	− 0.196	0.098	0.552	− 0.070	0.95
	0.88	− 0.95	− 2.39	− 2.22	− 1.54	0.82	2.20
Macro	0.329	0.089	− 0.061	− 0.121	− 0.091	0.030	0.240	0.414	0.95
	2.89	1.51	− 1.05	− 1.80	− 1.49	0.51	2.30
Mergers	0.276	0.025	− 0.124	− 0.170	− 0.113	0.047	0.309	0.251	0.96
	1.51	0.26	− 1.40	− 1.70	− 1.22	0.51	1.89
Multistrategy	0.778	0.094	− 0.321	− 0.467	− 0.343	0.049	0.710	0.500	0.95
	2.28	0.56	− 1.92	− 2.38	− 1.95	0.30	2.29
Opportunity index	0.735	0.049	− 0.377	− 0.545	− 0.454	− 0.104	0.505	− 0.191	0.92
	1.90	0.27	− 2.03	− 2.48	− 2.35	− 0.58	1.40
Short-sellers	− 0.919	0.110	0.793	1.131	1.124	0.772	0.074	3.012	0.95
	− 1.03	0.23	2.15	2.49	2.24	1.70	0.20
Value index	1.324	0.269	− 0.404	− 0.694	− 0.602	− 0.126	0.732	0.498	0.95
	2.88	1.18	− 1.83	− 2.70	− 2.61	− 0.57	1.73

The coefficients are obtained by regressing returns on an Almon (1965) polynomial defined on GDP growth as measured with \(d\ln GDP \times 100\). The number of lags can differ from one strategy to the next. Except for short-sellers, a positive (negative) sign for the sum of lags indicates a procyclical (contracyclical) strategy’s beta. The magnitude of the sum of lags indicates the degree of beta’s cyclicality. t-statistics are in italics.

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