Investment Funds: What Next?

Quantitative and Qualitative Analysis in the Social Sciences, Vol. 2, Issue 2, pp. 45-62.

18 Pages Posted: 25 May 2013

See all articles by Keith Cuthbertson

Keith Cuthbertson

City University London - Sir John Cass Business School

Dirk Nitzsche

City University London - Sir John Cass Business School

Niall O'Sullivan

University College Cork

Date Written: October 24, 2008

Abstract

Investment funds provide a low cost method of sharing in the rewards from capitalism. Recently “alternative investments” such as hedge funds have grown rapidly and the trading strategies open to hedge funds are now becoming available to mutual funds and even to ordinary retail investors. In this paper we analyze problems in assessing fund performance and the prospects for investment fund sectors. Choosing genuine outperformers among top funds requires a careful assessment of non-normality, order statistics and the possibility of false discoveries. The risk adjusted performance of the average hedge fund over the last 10-15 is actually not that impressive, although the “top” funds do appear to have statistically significant positive alphas.

Keywords: Mutual fund performance, hedge funds, persistence

JEL Classification: C14, G11, C15

Suggested Citation

Cuthbertson, Keith and Nitzsche, Dirk and O'Sullivan, Niall, Investment Funds: What Next? (October 24, 2008). Quantitative and Qualitative Analysis in the Social Sciences, Vol. 2, Issue 2, pp. 45-62. , Available at SSRN: https://ssrn.com/abstract=2269678

Keith Cuthbertson (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Dirk Nitzsche

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Niall O'Sullivan

University College Cork ( email )

Department of Economics
University College Cork
Cork, n/a
Ireland

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