Abstract

http://ssrn.com/abstract=972058
 
 

References (35)



 
 

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Hedge Funds, Managerial Skill, and Macroeconomic Variables


Doron Avramov


Hebrew University of Jerusalem

Robert Kosowski


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

Narayan Y. Naik


London Business School - Institute of Finance and Accounting

Melvyn Teo


Singapore Management University - Lee Kong Chian School of Business

December 29, 2009

AFA 2008 New Orleans Meetings Paper

Abstract:     
This paper evaluates hedge fund performance through portfolio strategies that incorporate predictability based on macroeconomic variables. Incorporating predictability substantially improves out-of-sample performance for the entire universe of hedge funds as well as for various investment styles. While we also allow for predictability in fund risk loadings and benchmark returns, the major source of investment profitability is predictability in managerial skills. In particular, long-only strategies that incorporate predictability in managerial skills outperform their Fung and Hsieh (2004) benchmarks by over 17 percent per year. The economic value of predictability obtains for different rebalancing horizons and alternative benchmark models. It is also robust to adjustments for backfill bias, incubation bias, illiquidity, fund termination, and style composition.

Number of Pages in PDF File: 47

Keywords: hedge funds, predictability, managerial skills, macroeconomic variables

JEL Classification: G11, G12, G14, G23

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Date posted: March 22, 2007 ; Last revised: November 15, 2013

Suggested Citation

Avramov, Doron and Kosowski, Robert and Naik, Narayan Y. and Teo, Melvyn, Hedge Funds, Managerial Skill, and Macroeconomic Variables (December 29, 2009). AFA 2008 New Orleans Meetings Paper. Available at SSRN: http://ssrn.com/abstract=972058 or http://dx.doi.org/10.2139/ssrn.972058

Contact Information

Doron Avramov
Hebrew University of Jerusalem ( email )
Mount Scopus
Jerusalem, IL 91905
Israel
HOME PAGE: http://pluto.huji.ac.il/~davramov/
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
Narayan Y. Naik
London Business School - Institute of Finance and Accounting ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 (Phone)
+44 20 724 3317 (Fax)
Melvyn Teo
Singapore Management University - Lee Kong Chian School of Business ( email )
50 Stamford Road
Singapore, 178899
Singapore
+65 6828 0735 (Phone)
+65 6822 0777 (Fax)

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References:  35
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