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Performance Persistence in the Alternative Investment Industry

James M. Park
PARADIGM Capital Management

Jeremy C. Staum
PARADIGM Capital Management

Abstract:
We construct an improved measure of skill among commodity trading advisors (CTAs) and hedge fund managers. The theoretical issues surrounding the possibility of internal leverage receive particular attention. The results strengthen previous findings that past performance, properly adjusted for risk, does give some indication of future performance. The statistical significance of the results is extreme, while the practical significance is moderate for CTAs and very great for hedge funds. Consequently, there should be noticeable rewards for implementing this criterion in portfolio construction by selecting traders with superior skill.

JEL Classifications: G11, G23

Working Paper Series

Date posted: November 08, 1998 ; Last revised: November 08, 1998

Suggested Citation

Park, James M. and Staum, Jeremy C., Performance Persistence in the Alternative Investment Industry. Available at SSRN: http://ssrn.com/abstract=139068 or doi:10.2139/ssrn.139068

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Contact Information

James M. Park (Contact Author) PARADIGM Capital Management ( email ) 12 East 49th Street, 32nd floor New York, NY 10017 United States 212-271-3388 (Phone) 212-271-3393 (Fax)
Jeremy C. Staum PARADIGM Capital Management ( email ) 12 East 49th Street, 32nd floor New York, NY 10017 United States