Download this Paper Open PDF in Browser

Do the Best Hedge Funds Hedge?

46 Pages Posted: 20 Mar 2008 Last revised: 19 Dec 2008

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Cristian Ioan Tiu

University at Buffalo; TIAA Institute

Date Written: December 17, 2008

Abstract

We provide a simple argument that suggests that better informed hedge funds choose to have less exposure to factor risk. Consistent with this argument we find that hedge funds that exhibit lower R-squares with respect to systematic factors have higher Sharpe ratios, higher information ratios, charge higher fees and attract more future inflows.

Keywords: Hedge funds, Systematic risk, Investment performance

JEL Classification: G11, G23

Suggested Citation

Titman, Sheridan and Tiu, Cristian Ioan, Do the Best Hedge Funds Hedge? (December 17, 2008). AFA 2009 San Francisco Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1107627 or http://dx.doi.org/10.2139/ssrn.1107627

Sheridan Titman (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Cristian Ioan Tiu

University at Buffalo ( email )

238 Jacobs Management Center
Jacobs Hall, North Campus
Buffalo, NY NY 14260
United States
7166453299 (Phone)

TIAA Institute ( email )

8500 Andrew Carnegie Blvd
E3/S8
Charlotte, NC 28262
United States

Paper statistics

Downloads
1,248
Rank
12,457
Abstract Views
5,299