Hedge Fund Performance Persistence: A New Approach

Posted: 15 Dec 2008 Last revised: 4 Dec 2012

See all articles by Nicole M. Boyson

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business

Date Written: December 15, 2008

Abstract

Recent literature has found some evidence of performance persistence in hedge funds. This study investigated whether this persistence varies with fund characteristics, such as size and age. Previous research has found that funds face capacity constraints, that investment flows chase past performance, and that as funds age, they become more passively managed, which reduces the likelihood of performance persistence as funds grow older and larger. Consistent with this model, this study found that performance persistence is strongest among small, young funds. A portfolio of these funds with prior good performance outperformed a portfolio of large, mature funds with prior poor performance by 9.6 percent per year.

Keywords: Performance Measurement and Evaluation, Manager Selection, Alternative Investments, Hedge Fund Strategies, Portfolio Management, Hedge Fund Strategies

Suggested Citation

Boyson, Nicole M., Hedge Fund Performance Persistence: A New Approach (December 15, 2008). Financial Analysts Journal, Vol. 64, No. 6, 2008. Available at SSRN: https://ssrn.com/abstract=1316406

Nicole M. Boyson (Contact Author)

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
617-373-4775 (Phone)

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