Download this Paper Open PDF in Browser

Hedge Fund Performance and Persistence in Bull and Bear Markets

40 Pages Posted: 9 Jan 2004  

Daniel P.J. Capocci

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

A. Corhay

University of Liege - Department of Financial Management; Maastricht University - Department of Finance

Georges Hubner

HEC Management School - University of Liège; Maastricht University - Department of Finance; Gambit Financial Solutions

Multiple version iconThere are 2 versions of this paper

Date Written: December 23, 2003

Abstract

This paper tests the performance of 2894 hedge funds in a time period that encompasses unambiguously bullish and bearish trends whose pivot is commonly set at March 2000. Our database proves to be fairly trustable with respect to the most important biases in hedge funds studies, despite the high attrition rate of funds observed in the down market. We apply an original ten-factor composite performance model that achieves very high significance levels. The analysis of performance indicates that most hedge funds significantly out-performed the market during the whole test period, mostly thanks to the bullish sub-period. In contrast, no significant under-performance of individual hedge funds strategies is observed when markets headed south. The analysis of persistence yields very similar results, with most of the predictability being found among middle performers during the bullish period. However, the Market Neutral strategy represents a remarkable exception, as abnormal performance is sustained throughout and significant persistence can be found between the 20% and 69% best performers in this category, probably thanks to an extreme adaptability and a very active investment behavior.

Keywords: Hedge fund, hedge funds, carhart, capocci, hubner, performance, persistence, decile analysis

JEL Classification: G2, G11, G15

Suggested Citation

Capocci, Daniel P.J. and Corhay, A. and Hubner, Georges, Hedge Fund Performance and Persistence in Bull and Bear Markets (December 23, 2003). Available at SSRN: https://ssrn.com/abstract=483222 or http://dx.doi.org/10.2139/ssrn.483222

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

HEC - Université de Liège ( email )

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

Luxembourg School of Finance ( email )

4 Rue Albert Borschette
Luxembourg, L-1246
Luxembourg

Edhec Risk and Management Research Center ( email )

58, rue du Port
59046 Lille Cedex
France

Albert H. R. F. Corhay

University of Liege - Department of Financial Management ( email )

Liege B-4000
Belgium

Maastricht University - Department of Finance

Maastricht, 6200 MD
Netherlands
+31-(0)43-3883861 (Phone)
+31-(0)43-3258530 (Fax)

Georges Hubner

HEC Management School - University of Liège ( email )

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

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Gambit Financial Solutions ( email )

Rue Forgeur 17
Liège, 4000
Belgium

Paper statistics

Downloads
1,347
Rank
10,915
Abstract Views
4,758