Information Spillovers and Performance Persistence for Hedge Funds
University of Pennsylvania - Finance Department; University of Pennsylvania - The Wharton School
Richard C. Green
Carnegie Mellon University - David A. Tepper School of Business
October 6, 2010
Published in the Journal of Financial Economics (JFE)
We present a simple model that rationalizes performance persistence in hedge fund limited partnerships. In contrast to the model for mutual funds of Berk and Green (2004), the learning in our model pertains to profitability associated with an innovative trading strategy or an emerging sector, rather than ability specific to the fund manager. As a result of potential information spillovers, which would increase competition in the sector if informed investors were to partner with nonincumbent managers, incumbent managers will let informed investors benefit from increases in estimated profitability following high returns realized with the trading strategy or in the sector.
Number of Pages in PDF File: 51
Keywords: Hedge Funds, Performance, Information Spillover
JEL Classification: G23, G24, D82Accepted Paper Series
Date posted: August 29, 2008 ; Last revised: December 7, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.609 seconds