Publications [#238556] of Andrew J. Patton

Journal Articles

1. Patton, AJ, Are "market neutral" hedge funds really market neutral?, Review of Financial Studies, vol. 22 no. 7 (2009), pp. 2295-2330, Oxford University Press (OUP), ISSN 0893-9454 [doi]
   (last updated on 2026/01/17)

   Abstract:
   Using a variety of different definitions of "neutrality," this study presents significant evidence against the neutrality to market risk of hedge funds in a range of style categories. I generalize standard definitions of "market neutrality," and propose five different neutrality concepts. I suggest statistical tests for each neutrality concept, and apply these tests to a database of monthly returns on 1423 hedge funds from five style categories. For the "market neutral" style, approximately one-quarter of the funds exhibit significant exposure to market risk; this proportion is statistically significantly different from zero, but less than the proportion of significant exposures for other hedge fund styles.