Evaluating the Performance of Hedge Fund Strategies: A Non-Parametric Analysis

50 Pages Posted: 14 Jul 2015 Last revised: 10 Oct 2015

See all articles by Alessandra Canepa

Alessandra Canepa

University of Turin

Maria Gonzalez

University of Castilla-La Mancha

Frank S. Skinner

Brunel University

Date Written: July 13, 2015

Abstract

We seek evidence that top performing hedge funds follow a different strategy than mediocre performing hedge funds by examining the structure of significant risk factors that explain the out of sample excess net returns. Consequently, we examine the out of sample returns of hedge funds to determine, first, if hedge funds have outperformed the market in recent years, second, whether top funds actually outperform mediocre performing hedge funds and thirdly, whether top funds have a different risk profile than mediocre hedge funds and therefore appear to follow a different strategy. We find that the risk profile of top quintile performing funds is distinctly different than mediocre quintile funds by having fewer risk factors that appear to anticipate the troubling economic conditions that prevailed after 2006.

Suggested Citation

Canepa, Alessandra and Gonzalez, Maria and Skinner, Frank S., Evaluating the Performance of Hedge Fund Strategies: A Non-Parametric Analysis (July 13, 2015). Available at SSRN: https://ssrn.com/abstract=2630034 or http://dx.doi.org/10.2139/ssrn.2630034

Alessandra Canepa

University of Turin ( email )

Lungo Dora Siena, 100 A,
University of Turin
Torino, TO 10153
Italy

Maria Gonzalez

University of Castilla-La Mancha ( email )

Plaza Universidad, 1
02071 Albacete, Ciudad Real 13071
Spain

Frank S. Skinner (Contact Author)

Brunel University ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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