Hedge Fund Manager Skills and Style-Shifting

63 Pages Posted: 12 Apr 2018 Last revised: 23 Feb 2019

See all articles by George J. Jiang

George J. Jiang

Washington State University

Bing Liang

University of Massachusetts Amherst - Department of Finance

Huacheng Zhang

Southwestern University of Finance and Economics - Institute of Financial Studies

Date Written: February 2019

Abstract

We document that a significant portion of hedge funds (6.6% each quarter) shift their investment styles. More importantly, we find that managers of style-shifting funds possess both style-timing ability and skill of generating abnormal returns in the new styles. After shifting, these funds deliver significantly higher returns than they would have achieved in their old styles: an extra 0.61% (1.34%) over the subsequent 3 (12) months. This superior performance can be attributed mainly to fund managers’ expertise in the new styles over short-horizons and style-timing ability over long-horizons. Finally, we show that small funds, winner funds, and funds with net inflows are more likely to shift styles.

Keywords: Hedge Funds; Style-Shifting; Fund Performance; Manager Skill; Style-Chasing

JEL Classification: G11; G23

Suggested Citation

Jiang, George and Liang, Bing and Zhang, Huacheng, Hedge Fund Manager Skills and Style-Shifting (February 2019). Available at SSRN: https://ssrn.com/abstract=3123660 or http://dx.doi.org/10.2139/ssrn.3123660

George Jiang

Washington State University ( email )

Department of Finance and Management Science
Carson College of Business
Pullman, WA 99-4746164
United States
509-3354474 (Phone)

HOME PAGE: http://directory.business.wsu.edu/bio.html?username=george.jiang

Bing Liang (Contact Author)

University of Massachusetts Amherst - Department of Finance ( email )

Amherst, MA 01003
United States

Huacheng Zhang

Southwestern University of Finance and Economics - Institute of Financial Studies ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

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