Hedge Fund Performance: What Do We Know?

68 Pages Posted: 22 Jan 2012 Last revised: 1 Jun 2016

Juha Joenväärä

University of Oulu; Imperial College Business School, Centre for Hedge Fund Research

Robert Kosowski

Imperial College Business School; CEPR (Centre for Economic Policy Research); University of Oxford, Oxford-Man Institute of Quantitative Finance

Pekka Tolonen

University of Oulu

Date Written: March 31, 2016

Abstract

This paper shows that several previously documented stylized facts about hedge fund performance are sensitive to database selection and associated biases. Based on a novel database aggregation, we show that qualitative and quantitative differences in conclusions about average performance stem from database differences in the coverage of dead funds and the completeness of assets under management information. Investors that consider chasing returns should heed our finding that there is no performance persistence for certain rebalancing frequencies and databases. Drawing on our results and a detailed appendix that describes our database aggregation, we make recommendations to hedge fund database users and researchers about hedge fund database selection, construction and comparison.

Keywords: Hedge fund performance, persistence, sample selection bias, managerial skill

JEL Classification: G11, G12, G23

Suggested Citation

Joenväärä, Juha and Kosowski, Robert and Tolonen, Pekka, Hedge Fund Performance: What Do We Know? (March 31, 2016). Available at SSRN: https://ssrn.com/abstract=1989410 or http://dx.doi.org/10.2139/ssrn.1989410

Juha Joenvaara

University of Oulu ( email )

Finland

Imperial College Business School, Centre for Hedge Fund Research

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Robert Kosowski (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
+442075943294 (Phone)

HOME PAGE: http://www3.imperial.ac.uk/people/r.kosowski

CEPR (Centre for Economic Policy Research) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

HOME PAGE: http://www.cepr.org/

University of Oxford, Oxford-Man Institute of Quantitative Finance ( email )

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

Pekka Tolonen

University of Oulu ( email )

P.O. Box 4600
Oulu FIN-90014
Finland

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