The Performance of Hedge Fund Strategies and the Asymmetry of Return Distributions
Hany A. Shawky
State University of New York at Albany - School of Business and Center for Institutional Investment Management
European Financial Management, Vol. 13, No. 2, pp. 309-331, March 2007
We present hedge fund performance estimates that adjust for stale prices, Fama-French risk factors and skewness. We contrast these new performance estimates with traditional performance measures. Using three-factor models to adjust for staleness in prices and to incorporate Fama-French factors along with the Harvey-Siddique (2000) two-factor model that incorporates skewness, we find that for the period 1990-2003, all hedge fund categories achieve above average performance when measured against an aggregate market index. More significantly, however, when we estimate performance at the individual hedge fund level, we discover that only 40 to 47% of the funds are shown to achieve an above average performance over that time period depending on the model used. These results have important implications for investors, endowments and pensions when they choose hedge fund managers.
Number of Pages in PDF File: 23
Date posted: March 4, 2007
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