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Performance Characteristics of Hedge Funds and Cta Funds: Natural Vs. Spurious Biases

Posted: 24 Jan 2001  

David A. Hsieh

Duke University - Fuqua School of Business; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

William Fung

Maple Financial Group

Abstract

It is well known that the pro forma performance of a sample of investment funds contains biases. These biases are documented in Brown, Goetzmann, Ibbotson, and Ross (1992) using mutual funds as subjects. The organization structure of hedge funds, as private and often offshore vehicles, makes data collection a much more onerous task, amplifying the impact of performance measurement biases. This paper reviews these biases in hedge funds. We also propose using funds-of-hedge funds to measure aggregate hedge fund performance, based on the idea that the investment experience of hedge fund investors can be used to estimate the performance of hedge funds.

Suggested Citation

Hsieh, David A. and Fung, William, Performance Characteristics of Hedge Funds and Cta Funds: Natural Vs. Spurious Biases. J of Financial and Quantitative Analysis, September 2000. Available at SSRN: https://ssrn.com/abstract=245557

David Arthur Hsieh (Contact Author)

Duke University - Fuqua School of Business ( email )

Department of Finance
Box 90120
Durham, NC 27708-0120
United States
919-660-7779 (Phone)
919-660-7961 (Fax)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

William (Bill) Fung

Maple Financial Group ( email )

79 Wellington Street West
Suite 3500
Toronto, Ontario M5K 1K7
Canada

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