Resaerch On Dynamics Of Private Securities Fund Risk And Return In China

China's Private Securities Fund is a generalized hedge funds.It has developed rapidly these years although it starts late.Various investment strategies and new private products develop fast,so it has caused a extensive attention.The research object of this paper is China's private securities fund.We study four strategies private securities funds' return and dynamic correlation using novel statistic models.The four strategies are stock strategy,event driven strategy,relative value strategy and fund of funds strategy.First,according to the investment mode of all kinds of strategy combined with private securities fund researchers' experience,initially selected Shanghai Composite Index,Government Bonds Index,CRB Index etc financial market's related index,and size,growth,mom as risk factor of return.Then for each specific investment strategy,we use LASSO for variable selection,and construct multi-factor model–HFM model for the four private securities fund's return,and compared with traditional three factor model and four factor model.We find that root mean square error of the fitting model has been decrease,and adjusted R squared has been increase,so we conclude that HFM model has a better fit effect.Besides,it can explain the risk factor in economics.To portray the dynamic properties of four strategies private securities funds retune variance-covariance property,we first use a vector autoregressive(VAR)model parameterized the mean component,then use DCC-GARCH to evaluated variance-covariance.The DCC-GARCH model not only can successfully capture dynamic return volatility properties but also can captures the dynamics of timevarying conditional correlations.According to the dynamic correlation figure,we find after 2013,correlation between stock strategy and event driven strategy has a negative trend.However,relative value and stock strategy has a positive correlation trend.Correlation between stock strategy and fund of fund strategy has a rising trend in the wave,and almost present positive correlation after 2013.Correlation between relative value and stock strategy,fund of fund and stock strategy has been positive increasingly after year 2013.