Measuring Funds of Hedge Funds Performance Using Quantile Regressions: Do Experience and Size Matter?

Posted: 29 Aug 2008 Last revised: 29 May 2013

Roland Füss

University of St. Gallen - School of Finance

Dieter G. Kaiser

Robus Capital Management Limited; Frankfurt School of Finance & Management

Anthony Strittmatter

Albert-Ludwigs University of Freiburg; University of St. Gallen

Date Written: September 11, 2009

Abstract

This paper is the first to use quantile regression to analyze the impact of experience and size of funds of hedge funds (FHFs) on performance. In comparison to OLS regression, quantile regression provides a more detailed picture of the influence of size and experience on FHF return behaviour. Hence, it allows us to study the relevance of these factors for various return and risk levels instead of average return and risk, as is the case with OLS regression. Because FHF size and age (as a proxy for experience) are available in a panel setting, we can perform estimations in an unbalanced stacked panel framework. This study analyzes time series and descriptive variables of 649 FHFs drawn from the Lipper TASS Hedge Fund database for the time period January 1996 to August 2007. Our empirical results suggest that experience and size have a negative effect on performance, with a positive curvature at the higher quantiles. At the lower quantiles, however, size has a positive effect with a negative curvature. Both factors show no significant effect at the median.

Keywords: Quantile regression, funds of hedge funds, performance, asset under management, fund age, fund manager's experience

JEL Classification: G11, G12, G23

Suggested Citation

Füss, Roland and Kaiser, Dieter G. and Strittmatter, Anthony, Measuring Funds of Hedge Funds Performance Using Quantile Regressions: Do Experience and Size Matter? (September 11, 2009). Journal of Alternative Investments, Vol. 12, No. 2, pp. 41-53, 2009. Available at SSRN: https://ssrn.com/abstract=1259430

Roland Füss (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Dieter G. Kaiser

Robus Capital Management Limited ( email )

25 Macklin Street
London, WC2B 5NN
United Kingdom
+496172-6816752 (Phone)

HOME PAGE: http://www.frankfurt-school.de/content/en/cpqf/team/Kaiser.html

Frankfurt School of Finance & Management ( email )

Sonnemannstra?e 9-11
Frankfurt am Main, 60314
Germany

Anthony Strittmatter

Albert-Ludwigs University of Freiburg ( email )

Department of Applied Econometrics
Platz der Alten Synagoge
Freiburg, D-79085
Germany
+49 761 203 2339 (Phone)
+49 761 203 2340 (Fax)

HOME PAGE: http://www.empiwifo.uni-freiburg.de/personen-staff/anthony-strittmatter

University of St. Gallen ( email )

Varnbuelstr. 14
St. Gallen, CH-9000
Switzerland

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