Do Prime Brokers Induce Similarities in Hedge Funds Performance?

1 Pages Posted: 14 Feb 2015

See all articles by Nataliya Gerasimova

Nataliya Gerasimova

Norwegian School of Economics (NHH) - Department of Finance

Date Written: February 12, 2015

Abstract

Early studies show that hedge fund performance is correlated across funds. I empirically document that similarities in hedge fund returns are associated with the presence of the same prime broker. Using data on prime brokerage relationships from 2000 to 2012, I estimate that dealing with the same broker increases performance correlation across funds of around 53%. My results are robust to controlling for the standard systematic risk factors, to different performance similarity proxies, to different subsamples, and to other possible determinants of performance similarity as the hedge funds’ domicile and investment style.

Keywords: Hedge Funds, Prime Brokers, Performance

JEL Classification: G2, G23

Suggested Citation

Gerasimova, Nataliya, Do Prime Brokers Induce Similarities in Hedge Funds Performance? (February 12, 2015). Available at SSRN: https://ssrn.com/abstract=2564243 or http://dx.doi.org/10.2139/ssrn.2564243

Nataliya Gerasimova (Contact Author)

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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