Hedge Fund Factor Exposures with Daily Data
52 Pages Posted: 14 Dec 2022
Date Written: November 27, 2022
Abstract
We find that performance evaluation of hedge funds at daily resolution suggests exposures to more factors and consequently less alpha than identical analyses at monthly resolution, due to the higher statistical precision of daily estimates. Additionally, using a comprehensive set of daily factors and predictors of factor exposures, we report several new findings for hedge fund returns, including exposure to commodity puts and daily variation in exposures as a function of market liquidity. Since hedge fund returns have been analyzed almost exclusively with monthly returns and a limited set of static factors, our findings suggest that much outstanding research on hedge fund alpha and risk exposures should be interpreted with caution.
Keywords: Hedge fund factor exposures, hedge fund performance valuation, daily factors
JEL Classification: G23, G12
Suggested Citation: Suggested Citation