Does Hedge Fund Performance Persist? Overview and New Empirical Evidence

40 Pages Posted: 27 Apr 2009

See all articles by Martin Eling

Martin Eling

University of St. Gallen - Institute of Insurance Economics; University of Saint Gallen - School of Finance (SoF)

Multiple version iconThere are 2 versions of this paper

Abstract

The contribution of this paper is to provide an overview and new empirical evidence on hedge fund performance persistence, which has been a controversial issue in the academic literature during the last several years. In the first step, we review recent studies and put them into a joint evaluation of hedge fund performance persistence. In the second step, the methodological framework developed in the overview is used to present new empirical evidence. We find different levels of performance persistence depending on the statistical methodology and the hedge fund strategy employed. In our study, performance persistence cannot be explained by the use of option-like strategies, but it can be partially explained by survivorship and backfilling bias. Differences among hedge fund strategies might be explained by return smoothing. Finally, we develop a rationale for choosing between different methodologies to measure performance persistence and conclude that the multi-period Kolmogorov-Smirnov test is the most useful for evaluating performance persistence of hedge funds.

Suggested Citation

Eling, Martin, Does Hedge Fund Performance Persist? Overview and New Empirical Evidence. European Financial Management, Vol. 15, Issue 2, pp. 362-401, March 2009. Available at SSRN: https://ssrn.com/abstract=1376569 or http://dx.doi.org/10.1111/j.1468-036X.2008.00471.x

Martin Eling (Contact Author)

University of St. Gallen - Institute of Insurance Economics ( email )

Kirchlistrasse 2
St. Gallen, 9010
Switzerland

University of Saint Gallen - School of Finance (SoF) ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
691
PlumX Metrics