Hedge Fund Innovation

48 Pages Posted: 3 Nov 2012 Last revised: 1 Aug 2022

See all articles by Arjen Siegmann

Arjen Siegmann

Vrije Universiteit Amsterdam, School of Business and Economics

Denitsa Stefanova

Universite du Luxembourg

Marcin Zamojski

University of Gothenburg, Centre for Finance

Date Written: July 5, 2022

Abstract

We analyze innovation and experimentation of hedge funds based on their initial risk profiles. We cluster hedge funds according to self-reported strategy descriptors. Within the clusters, we identify early and late entrants. Early-movers within a cluster of similar funds perform better and survive longer. The performance deteriorates on average as we go from innovators to early and late imitators. Funds that remain unclustered have distinct risk profiles and engage in riskier and less liquid strategies. The results point to a distinct first-mover advantage in the hedge-fund industry, which could be an important driver for experimentation and innovation.

Keywords: hedge funds, first-mover advantage, innovation, clustering

JEL Classification: G15, G23

Suggested Citation

Siegmann, Arjen and Stefanova, Denitsa and Zamojski, Marcin, Hedge Fund Innovation (July 5, 2022). Available at SSRN: https://ssrn.com/abstract=2170435 or http://dx.doi.org/10.2139/ssrn.2170435

Arjen Siegmann

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, NOT IN US OR CANADA 1081 HV
Netherlands

HOME PAGE: http://https://research.vu.nl/en/persons/arjen-siegmann

Denitsa Stefanova

Universite du Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Marcin Zamojski (Contact Author)

University of Gothenburg, Centre for Finance ( email )

Box 640
Gothenburg, 405 30
Sweden

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