Persistent Doubt: An Examination of Hedge Fund Performance

27 Pages Posted: 2 Sep 2016

See all articles by Maria Gonzalez

Maria Gonzalez

University of Castilla-La Mancha

Nicolas A. Papageorgiou

HEC Montreal - Department of Finance

Frank S. Skinner

Brunel University

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Date Written: September 2016

Abstract

We examine whether performance persistence is suspicious. Top quintile portfolios formed on the Sharpe ratio, alpha, and information ratio persistently outperform similarly constructed mediocre third quintile portfolios throughout our sample period, but performance is more modest and less persistent when portfolios are formed on the excess manipulation‐proof performance measure (EMPPM). By selecting funds formed on ranking by Sharpe and information ratios, investors also select funds that have persistently doubtful performance according to the doubt ratio. In contrast, portfolios formed on alphas and especially the EMPPM have much less excess and persistent doubt.

Keywords: hedge funds, performance measures, manipulation‐proof performance measure, doubt ratio

Suggested Citation

Gonzalez, Maria and Papageorgiou, Nicolas A. and Skinner, Frank S., Persistent Doubt: An Examination of Hedge Fund Performance (September 2016). European Financial Management, Vol. 22, Issue 4, pp. 613-639, 2016, Available at SSRN: https://ssrn.com/abstract=2833618 or http://dx.doi.org/10.1111/eufm.12070

Maria Gonzalez (Contact Author)

University of Castilla-La Mancha ( email )

Plaza Universidad, 1
02071 Albacete, Ciudad Real 13071
Spain

Nicolas A. Papageorgiou

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Frank S. Skinner

Brunel University ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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