Did Any 'Real' Top Hedge Funds Survive the Sub-Prime Crisis?

42 Pages Posted: 30 Apr 2009 Last revised: 17 Jan 2023

See all articles by Meng-Feng (Stephane) Yen

Meng-Feng (Stephane) Yen

Department of Accountancy and Graduate Institute of Finance, National Cheng Kung University; FinTech Center, NCKU

Ying-Lin Hsu

National Chung Hsing University

Date Written: April 30, 2009

Abstract

Controlling for the data-snooping bias, this study aims to identify all outperformers for periods prior to the outbreak of the sub-prime mortgage crisis and to test if any of these in-sample ‘real’ top hedge funds survived this credit crunch during the Jul. 2007 to Aug. 2008 (out-of-sample) period. We apply Fung and Hsieh’s seven factor model to retrieve the abnormal returns (or alpha values) of hedge funds of various categories across different sample periods. Using Romano and Wolf’s stepwise reality check to control for the data-snooping bias that would otherwise affect our results, we investigate whether ‘real’ top hedge funds abnormal returns (or alpha values) are persistent across the periods prior to and after the outbreak of the crisis. The monthly returns of 12,996 hedge funds from the HFR hedge fund database backdating to Jan. 1994 are examined and we find that some ‘real’ outperformers do generate a significantly positive alpha during the crisis, a result robust to the data-snooping bias.

Keywords: hedge fund, data-snooping bias, stepwise reality check, seven-factor model, sub-prime mortgage crisis

JEL Classification: C12, C14, G19

Suggested Citation

Yen, Meng-Feng (Stephane) and Hsu, Ying-Lin, Did Any 'Real' Top Hedge Funds Survive the Sub-Prime Crisis? (April 30, 2009). Available at SSRN: https://ssrn.com/abstract=1397051 or http://dx.doi.org/10.2139/ssrn.1397051

Meng-Feng (Stephane) Yen (Contact Author)

Department of Accountancy and Graduate Institute of Finance, National Cheng Kung University ( email )

1 University Rd.,
East District
Tainan City, Taiwan 70101
Taiwan
(06) 275-7575 ext 53443 (Phone)
(06) 2744104 (Fax)

HOME PAGE: http://https://sites.google.com/gs.ncku.edu.tw/mfyen

FinTech Center, NCKU ( email )

1 University Rd.,
East District
Tainan, 701
Taiwan
886(6)2757575 ext 53020 (Phone)

HOME PAGE: http://https://fintech.ncku.edu.tw/index.php?lang=en

Ying-Lin Hsu

National Chung Hsing University ( email )

250, Kuo Kuang Road
Taichung, Taiwan
Taiwan

HOME PAGE: http://www.amath.nchu.edu.tw/~ylhsu

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
307
Abstract Views
2,946
Rank
180,386
PlumX Metrics