PT  - JOURNAL ARTICLE
AU  - Gaurav S. Amin
AU  - Harry M. Kat
TI  - Stocks, Bonds, and Hedge Funds
AID  - 10.3905/jpm.2003.319900
DP  - 2003 Jul 31
TA  - The Journal of Portfolio Management
PG  - 113--120
VI  - 29
IP  - 4
4099  - https://pm-research.com/content/29/4/113.short
4100  - https://pm-research.com/content/29/4/113.full
AB  - What are the diversification effects of introducing hedge funds into a portfolio of stocks and bonds? In terms of skewness and kurtosis, equity and hedge funds do not combine very well. Although hedge funds significantly improve a portfolio's mean-variance characteristics, their inclusion can also be expected to lead to significantly lower skewness as well as higher kurtosis. Hedge funds do not provide a free lunch, but rather entail a definite trade-off between profit and loss potential. To have any impact on the overall portfolio, allocations to hedge funds would have to far exceed the typical 1% to 5% that many institutions typically consider.