Modelling the Optimal Hedge Fund Portfolio Using a Multiscaling Method

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Asset allocation theory sits at the heart of modern finance, yet remains something of a conundrum. By developing the a longer-horizon framework to asset allocation involving hedge funds, this project provides a significant insight onto sources of risk-horizon effects on asset allocation and allow us to understand how the exposure of hedge funds to the market risk varies across investment horizons. This allows academics to address a wide range of problems in optimal asset allocation and performance measurement. In addition, the outcomes can be applied to risk management by practitioners for their international and Australian domestic investors.