Market-neutral hedge funds may experience considerable volatility. The source of volatile returns is the use of ________.

Question

Quizplus · Accepted Answer

Market-neutral hedge funds often use leverage to amplify their returns, which can lead to significant volatility. Pure play and directional bets do not necessarily generate volatility, while net short positions are often a means of reducing volatility through hedging.

Market-Neutral Hedge Funds May Experience Considerable Volatility