62 Pages Posted: 14 Mar 2012 Last revised: 26 Apr 2017
Date Written: April 21, 2017
We reconsider the question of whether beta-centric hedge fund activity is predictive of superior performance. We construct a measure of overall beta activity of fund managers, Beta Activity, and find evidence that top beta active managers deliver superior long term out-of-sample performance compared to top alpha active managers. Beta Activity successfully captures the time varying nature of beta exposures that could be interpreted as a common factor with both SR (systematic risk) and (1-R2) measures, completely explaining the long term predictive significance of SR, and partially explaining the long term significance of (1-R2). Beta Activity also compares favorably to extant measures of market timing, capturing or partially capturing the explanatory power of such measures in hedge fund performance.
Keywords: hedge funds, alpha, beta, active management, factor timing, performance measurement, performance prediction
JEL Classification: G11, G23
Suggested Citation: Suggested Citation
Duanmu, Jun and Malakhov, Alexey and McCumber, William R., Beta Active Hedge Fund Management (April 21, 2017). Available at SSRN: https://ssrn.com/abstract=2021240 or http://dx.doi.org/10.2139/ssrn.2021240