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
Date Written: October 24, 2008
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: Suggested Citation