Does Hedge Fund Performance Persist? Overview and New Empirical Evidence
Abstract"The contribution of this paper is to provide an overview and new empirical evidence on hedge fund performance persistence, which has been a controversial issue in the academic literature during the last several years. In the first step, we review recent studies and put them into a joint evaluation of hedge fund performance persistence. In the second step, the methodological framework developed in the overview is used to present new empirical evidence. We find different levels of performance persistence depending on the statistical methodology and the hedge fund strategy employed. In our study, performance persistence cannot be explained by the use of option-like strategies, but it can be partially explained by survivorship and backfilling bias. Differences among hedge fund strategies might be explained by return smoothing. Finally, we develop a rationale for choosing between different methodologies to measure performance persistence and conclude that the multi-period Kolmogorov-Smirnov test is the most useful for evaluating performance persistence of hedge funds." Copyright (c) 2009 The Author Journal compilation (c) 2009 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by European Financial Management Association in its journal European Financial Management.
Volume (Year): 15 (2009)
Issue (Month): 2 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1354-7798
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- Auer, Benjamin R. & Schuhmacher, Frank, 2013. "Robust evidence on the similarity of Sharpe ratio and drawdown-based hedge fund performance rankings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 24(C), pages 153-165.
- Benjamin Auer, 2013. "The low return distortion of the Sharpe ratio," Financial Markets and Portfolio Management, Springer, vol. 27(3), pages 299-306, September.
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