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Hedge Fund Strategies (Part 4) –Hedged Equity Market Neutral

Hedge Fund Strategies (Part 4) –Hedged Equity Market Neutral

Traders take positions in pairs of similar stocks, longing the “undervalued” one and shorting the “overvalued one”, thereby placing a bet on the ultimate outperformance of the long position.

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Copyright 2011 Eric Bank, Freelance Writer
Capital Asset Pricing Model, Part Two – Systematic Risk

Capital Asset Pricing Model, Part Two – Systematic Risk

We are reviewing the underlying assumptions made by the Capital Asset Pricing Model (CAPM). Recall from last time the assumption that returns are distributed normally (i.e. a bell-shaped curve) and how this fails to account for skew and fat tails. Today we’ll look at CAPM’s assumption that there is but a single source of priced systematic risk: market beta.

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Copyright 2011 Eric Bank, Freelance Writer