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Can Hedge Funds Time the Market?

11 Pages Posted: 19 Jun 2017 Last revised: 19 Oct 2017

Michael W. Brandt

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

Federico Nucera

Luiss Guido Carli, Department of Economics and Finance

Giorgio Valente

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Date Written: October 18, 2017

Abstract

We answer the somewhat narrower question of whether hedge funds adjust their conditional market exposure in response to real-time changes in macroeconomic conditions, and whether doing so improves their performance. We find that hedge funds differ substantially in their responsiveness to macroeconomic data. The most pro-cyclical market timers outperform their less active and counter-cyclical peers by over four percent annualized with a risk adjusted alpha of 5.5 percent.

Keywords: nowcasting, business cycle, hedge funds, market timing

JEL Classification: E32, G11, G20

Suggested Citation

Brandt, Michael W. and Nucera, Federico and Valente, Giorgio, Can Hedge Funds Time the Market? (October 18, 2017). Available at SSRN: https://ssrn.com/abstract=2988484

Michael Brandt (Contact Author)

Duke University - Fuqua School of Business ( email )

1 Towerview Drive
Durham, NC 27708-0120
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Federico Nucera

Luiss Guido Carli, Department of Economics and Finance ( email )

HOME PAGE: http://www.luiss.it

Giorgio Valente

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR) ( email )

3 Garden Road, 8th Floor
Hong Kong
China

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