Abstract

http://ssrn.com/abstract=1989410
 
 

References (35)



 


 



Hedge Fund Performance: What Do We Know?


Juha Joenväärä


University of Oulu ; Imperial College Business School, Centre for Hedge Fund Research

Robert Kosowski


Imperial College Business School; University of Oxford, Oxford-Man Institute of Quantitative Finance

Pekka Tolonen


University of Oulu

April 29, 2014


Abstract:     
This paper shows that several previously documented stylized facts about hedge fund performance are sensitive to database selection and associated biases. Based on a novel database aggregation, we show that qualitative and quantitative differences in conclusions about average performance stem from database differences in the coverage of dead funds, backfill bias as well as the completeness of assets under management information. Once database selection biases are carefully accounted for, we find, in contrast to earlier studies, that fund share restrictions (or proxies for illiquidity), are not associated with higher fund performance while hedge funds with greater managerial incentives typically outperform. Investors that consider chasing returns, should heed our finding that there is no performance persistence for certain rebalancing frequencies and databases when equal-weighting funds. Drawing on our results and a detailed appendix that describes our database aggregation, we make three recommendations to hedge fund database users and researchers about hedge fund database selection, construction and comparison.

Number of Pages in PDF File: 90

Keywords: Hedge fund performance, persistence, sample selection bias, managerial skill

JEL Classification: G11, G12, G23

working papers series





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Date posted: January 22, 2012 ; Last revised: May 8, 2014

Suggested Citation

Joenväärä, Juha and Kosowski, Robert and Tolonen, Pekka, Hedge Fund Performance: What Do We Know? (April 29, 2014). Available at SSRN: http://ssrn.com/abstract=1989410 or http://dx.doi.org/10.2139/ssrn.1989410

Contact Information

Juha Joenväärä
University of Oulu ( email )
Finland
Imperial College Business School, Centre for Hedge Fund Research
South Kensington Campus
London SW7 2AZ
United Kingdom
Robert Kosowski (Contact Author)
Imperial College Business School ( email )
South Kensington Campus
Exhibition Road
London SW7 2AZ, DC SW7 2AZ
United Kingdom
+442075943294 (Phone)
HOME PAGE: http://www3.imperial.ac.uk/people/r.kosowski
University of Oxford, Oxford-Man Institute of Quantitative Finance ( email )
Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom
Pekka Tolonen
University of Oulu ( email )
P.O. Box 4600
Oulu FIN-90014
Finland
Feedback to SSRN


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