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Information Spillovers and Performance Persistence for Hedge FundsVincent GlodeUniversity of Pennsylvania - Finance Department; University of Pennsylvania - The Wharton School Richard C. GreenCarnegie Mellon University - David A. Tepper School of Business October 6, 2010 Published in the Journal of Financial Economics (JFE) Abstract: 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, D82 Accepted Paper SeriesDate posted: August 29, 2008 ; Last revised: December 7, 2011Suggested CitationContact Information
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