Performance Persistence in the Alternative Investment Industry

21 Pages Posted: 8 Nov 1998

See all articles by James M. Park

James M. Park

PARADIGM Capital Management

Jeremy C. Staum

PARADIGM Capital Management

Abstract

We construct an improved measure of skill among commodity trading advisors (CTAs) and hedge fund managers. The theoretical issues surrounding the possibility of internal leverage receive particular attention. The results strengthen previous findings that past performance, properly adjusted for risk, does give some indication of future performance. The statistical significance of the results is extreme, while the practical significance is moderate for CTAs and very great for hedge funds. Consequently, there should be noticeable rewards for implementing this criterion in portfolio construction by selecting traders with superior skill.

JEL Classification: G11, G23

Suggested Citation

Park, James M. and Staum, Jeremy C., Performance Persistence in the Alternative Investment Industry. Available at SSRN: https://ssrn.com/abstract=139068 or http://dx.doi.org/10.2139/ssrn.139068

James M. Park (Contact Author)

PARADIGM Capital Management ( email )

12 East 49th Street, 32nd floor
New York, NY 10017
United States
212-271-3388 (Phone)
212-271-3393 (Fax)

Jeremy C. Staum

PARADIGM Capital Management ( email )

12 East 49th Street, 32nd floor
New York, NY 10017
United States

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