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An Empirical Evaluation of Hedge Fund Managerial Skills using Bayesian Techniques

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  • John Weirstrass Muteba Mwamba

    (School of Economics, University of Johannesburg, Auckland Park Campus, Corner University Road and Kingsway Avenue Auckland Park, Johannesburg South Africa)

Abstract

This paper makes use of the Bayesian method to evaluate hedge fund managers’ selectivity, market timing and outperformance skills separately, and investigates their persistence from January 1995 to June 2010. We divide this sample period into four overlapping sub-sample periods that contain different economic cycles. We define a skilled manager as a manager who can outperform the market in two consecutive sub-sample periods. We employ Bayesian linear CAPM and Bayesian quadratic CAPM to generate skill coefficients during each sub-sample period. We found that fund managers who possess selectivity skills can outperform the market at 7.5% significant level if and only if the economic conditions that governed the financial market during the period between sub-sample period2 and sub-sample period3 remain the same.

Suggested Citation

  • John Weirstrass Muteba Mwamba, 2017. "An Empirical Evaluation of Hedge Fund Managerial Skills using Bayesian Techniques," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 13(1), pages 63-82.
    • Handle: RePEc:usm:journl:aamjaf01301_63-82
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    File URL: http://web.usm.my/journal/aamjaf/aamjaf13012017/aamjaf13012017_3.pdf
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    References listed on IDEAS

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    3. John Muteba Mwamba, 2012. "Implementing A Robust Risk Model For South African Equity Markets: A Peak-Over-Threshold Approach," South African Journal of Economics, Economic Society of South Africa, vol. 80(4), pages 459-472, December.
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    Cited by:

    1. Puspita Ghaniy Anggraini & Mahfud Sholihin, 2023. "What do we know about managerial ability? A systematic literature review," Management Review Quarterly, Springer, vol. 73(1), pages 1-30, February.

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