Hedge Fund Performance: A Quantitative Survey

61 Pages Posted: 18 Jul 2022

See all articles by Fan Yang

Fan Yang

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies, Students

Tomas Havranek

Charles University in Prague; Centre for Economic Policy Research (CEPR)

Zuzana Irsova

Charles University in Prague

Jiri Novak

Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Czech Republic

Date Written: July 1, 2022

Abstract

We provide the first quantitative survey of the empirical literature on hedge fund performance. We examine the impact of potential biases on the reported results. Using a sample of 1,019 intercept terms from regressions of hedge fund returns on risk factors (the "alpha") collected from 74 studies published between 2001 and 2021 we show that inferences about hedge fund returns are not significantly contaminated by publication selection bias. Most of our monthly alpha estimates adjusted for the (small) bias fall within a relatively narrow range of 30 to 40 basis points. Considering several partitions of our sample, we document a modest publication bias only for estimates based on instrumental variables (IV), for which relatively large standard errors are common. In contrast, studies that explicitly control for the potential biases in the underlying data (e.g. the backfilling bias and the survivorship bias) report lower alphas. Our results demonstrate that despite the prevalence of the publication selection bias in numerous other research settings, publication may not be selective when there is no strong a priori theoretical prediction about the sign of estimated coefficients, which may induce greater readiness to publish statistically insignificant results.

Keywords: hedge funds, meta-analysis, publication bias

JEL Classification: J23, J24, J31

Suggested Citation

Yang, Fan and Havranek, Tomas and Irsova, Zuzana and Novak, Jiri, Hedge Fund Performance: A Quantitative Survey (July 1, 2022). Available at SSRN: https://ssrn.com/abstract=4151821 or http://dx.doi.org/10.2139/ssrn.4151821

Fan Yang

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies, Students ( email )

Opletalova 26
Praha 1
Czech Republic

Tomas Havranek

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Zuzana Irsova

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Jiri Novak (Contact Author)

Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Czech Republic ( email )

Opletalova 1606/26
Praha 1, 11000
Czech Republic
+420 222 112 314 (Phone)

HOME PAGE: http://ies.fsv.cuni.cz/cs/staff/novakji

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