Hedge Fund Exposure to Time-Series Momentum Strategies

Abstract

This project proposes to investigate the exposure to time-series momentum strategy by hedge funds with various trading strategies. In particular, the project attempts to explain the fund return by including time-series momentum strategies factors into traditional Fung and Hsieh’s nine-factor model. The aim of the project is twofold. Firstly, to explore what types of hedge fund exposure more to the time-series momentum strategy. Secondly, if the hedge fund return relies on time-series momentum strategy, how does the dependence changes over time. The findings of this piece of research provide useful evidence that global macro fund and market neutral fund follow time-series momentum strategies. Global macro funds get more exposure to monthly time-series momentum as the strategy exhibits positive return. Market neutral fund returns follow the similar pattern. This piece of research may provide insight for researcher to extend Baltas and Kieslowski’s momentum strategies in futures market and trend-following funds to other types of hedge fund.