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Traditional mean/variance analysis as proposed by Markowitz shows that for the period 1994-2020 the risk adjusted performance of hedge funds is superior to traditional investments.
Traditional mean/variance analysis as proposed by Markowitz shows that for the period 1994-2020 the risk adjusted performance of hedge funds is superior to traditional investments. However, it can be argued that this approach seriously understates the risk of hedge fund investments. Discuss the limitations of the Markowitz approach with particular emphasis on the statistical properties of hedge fund returns. (20 marks)
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