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Hedge funds: performance, risk, and capital formation
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In this article, the authors used a comprehensive data set of funds-of-funds to investigate performance, risk, and capital formation in the hedge fund industry from 1995 to 2004.Abstract:
We use a comprehensive data set of funds-of-funds to investigate performance, risk, and capital formation in the hedge fund industry from 1995 to 2004. While the average fund-of-funds delivers alpha only in the period between October 1998 and March 2000, a subset of funds-of-funds consistently delivers alpha. The alpha-producing funds are not as likely to liquidate as those that do not deliver alpha, and experience far greater and steadier capital inflows than their less fortunate counterparts. These capital inflows attenuate the ability of the alpha producers to continue to deliver alpha in the future.read more
Citations
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Journal ArticleDOI
Do Hot Hands Exist Among Hedge Fund Managers? An Empirical Evaluation
TL;DR: This article developed a statistical model that relates a hedge fund's performance to its decision to liquidate or close in order to infer the performance of the hedge fund that left the database, finding significant performance persistence among superior funds, but little evidence of persistence among inferior funds.
ReportDOI
Econometric Measures of Systemic Risk in the Finance and Insurance Sectors
TL;DR: This paper proposed several econometric measures of systemic risk to capture the interconnectedness among the monthly returns of hedge funds, banks, brokers, and insurance companies based on principal components analysis and Granger-causality tests.
Journal ArticleDOI
Scale and skill in active management
TL;DR: The authors empirically analyze the nature of returns to scale in active mutual fund management and find strong evidence of decreasing returns at the industry level and find that performance deteriorates over a typical fund's lifetime.
Journal ArticleDOI
The Gambler's and Hot-Hand Fallacies: Theory and Applications
Matthew Rabin,Dimitri Vayanos +1 more
TL;DR: This paper developed a model of the gambler's fallacy, the mistaken belief that random sequences should exhibit systematic reversals, and showed that an individual who holds this belief and observes a sequence of signals can exaggerate the magnitude of changes in an underlying state but underestimate their duration.
Journal ArticleDOI
Hedge Fund Risk Dynamics: Implications for Performance Appraisal
TL;DR: The authors employ an optimal changepoint regression that allows risk exposures to shift, and illustrate the impact on performance appraisal using a sample of live and dead funds during the period January 1994 through December 2005.
References
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Journal ArticleDOI
A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
ReportDOI
A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix
Whitney K. Newey,Kenneth D. West +1 more
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
Journal ArticleDOI
Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
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