An Analysis of Hedge Fund Performance

Posted: 15 Apr 2003  

Daniel P.J. Capocci

HEC - Université de Liège; Luxembourg School of Finance; Edhec Risk and Management Research Center

Georges Hübner

HEC Liège


Using one of the largest hedge fund databases ever used (2796 individual funds including 801 dissolved), we investigate hedge funds performance using various asset pricing models, including an extension of Carhart's (1997) specification combined with the Fama and French (1998) and Agarwal and Naik (2002) models and a new factor that takes into account the fact that some hedge funds invest in emerging bond markets. This addition is particularly suitable for more than half of the hedge funds categories, and for all funds in general. The performance of hedge funds for several individual strategies and different subperiods, including the Asian Crisis period, indicates limited evidence of persistence in performance but not for extreme performers.

Keywords: Hedge funds, performance, persistence, Asian crisis, emerging markets, CAPM, dissolution frequenties, survivorship bias, correlation, history bias, total returns

JEL Classification: G2, G11, G15

Suggested Citation

Capocci, PhD - CAIA, Daniel P.J. and Hübner, Georges, An Analysis of Hedge Fund Performance. Journal of Empirical Finance Journal of Empirical Finance, Vol. 11, No. 1, pp. 55-89, January 2004. Available at SSRN:

Daniel P.J. Capocci, PhD - CAIA (Contact Author)

HEC - Université de Liège ( email )

Bld du Rectorat 7 Bat. B31
Liege, 4000
+32/87784221 (Phone)
+32/87787140 (Fax)

Luxembourg School of Finance ( email )

4 Rue Albert Borschette
Luxembourg, L-1246

Edhec Risk and Management Research Center ( email )

58, rue du Port
59046 Lille Cedex

Georges Hübner

HEC Liège ( email )

Rue Louvrex 14, Bldg. N1
Liege, 4000
+32 42327428 (Phone)

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