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Hedge Funds: Risk and Return

Posted: 30 Dec 2005  

Burton G. Malkiel

Princeton University - Bendheim Center for Finance; National Bureau of Economic Research (NBER)

Atanu Saha

Micronomics Inc.

Abstract

From a database that is relatively free of bias, this article provides measures of the returns of hedge funds and of the distinctly nonnormal characteristics of the data. The results include risk-adjusted measures of performance and tests of the degree to which hedge funds live up to their claim of market neutrality. The substantial attrition of hedge funds is examined, the determinants of hedge fund demise are analyzed, and results of tests of return persistence are presented. The conclusion is that hedge funds are riskier and provide lower returns than is commonly supposed.

Keywords: Alternative Investments, Hedge Fund Strategies, Portfolio Management, Hedgefund Strategies

Suggested Citation

Malkiel, Burton G. and Saha, Atanu, Hedge Funds: Risk and Return. Financial Analysts Journal, Vol. 61, No. 6, pp. 80-88, November/December 2005. Available at SSRN: https://ssrn.com/abstract=872868

Burton G. Malkiel (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Princeton University - Bendheim Center for Finance ( email )

26 Prospect Avenue
Princeton, NJ 08540
United States
609-258-6445 (Phone)
609-258-0771 (Fax)

Atanu Saha

Micronomics Inc. ( email )

Twenty-Fifth Floor
400 South Hope Street
Los Angeles, CA 90071-2826

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