Trades of the Living Dead: Style Differences, Style Persistence and Performance of Currency Fund Managers

47 Pages Posted: 9 Mar 2009

See all articles by Richard M. Levich

Richard M. Levich

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Momtchil Pojarliev

Fischer Francis Trees & Watts, Inc.

Multiple version iconThere are 3 versions of this paper

Date Written: February 2009

Abstract

We make use of a new database on daily currency fund manager returns over a three-year period, 2005-08. This higher frequency data allows us to estimate both alpha measures of performance and beta style factors on a yearly basis, which in turn allows us to test for persistence. We find no evidence to support alpha persistence; a manager's alpha in one year is not significantly related to his alpha in the prior year. On the other hand, there is substantial evidence for style persistence; funds that rely on carry, trend or value trading or with a long/short bias toward currency volatility are likely to maintain that style in the following year. In addition, we are able to examine the performance of managers that survive through the entire sample period, versus those that drop out. We find significant differences in both the investment styles of living versus deceased funds, as well as their realized alpha performance measures. We conjecture that both style differences and ineffective market timing, rather than market conditions, have impacted performance outcomes and induced some managers to close their funds.

Suggested Citation

Levich, Richard M. and Pojarliev, Momtchil, Trades of the Living Dead: Style Differences, Style Persistence and Performance of Currency Fund Managers (February 2009). NYU Working Paper No. FIN-08-005. Available at SSRN: https://ssrn.com/abstract=1354493

Richard M. Levich (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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National Bureau of Economic Research (NBER)

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Momtchil Pojarliev

Fischer Francis Trees & Watts, Inc. ( email )

200 Park Avenue, 11th Floor
New York, NY 10166
United States

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