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Quantitative selection of hedge funds using data envelopment analysis

Author

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  • Huyen Nguyen-Thi-Thanh

    (LEO - Laboratoire d'économie d'Orleans [2008-2011] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)

Abstract

Previous studies have documented that Data Envelopment Analysis(DEA) could be a good tool to evaluate fund performance,especially the performance of hedge funds as it can incorporatemultiple risk-return attributes characterizing hedge fund's nonnormal return distribution in an unique performance score. Thepurpose of this paper is to extend the use of DEA to the contextof hedge fund selection when investors must face multi-dimensionalconstraints, each one associated to a relative importance level.Unlike previous studies which used DEA in an empirical framework,this research puts emphasis on methodological issues. I showedthat DEA can be a good tailor-made decision-making tool to assistinvestors in selecting funds that correspond the most to theirfinancial, risk-aversion, diversification and investment horizonconstraints.

Suggested Citation

  • Huyen Nguyen-Thi-Thanh, 2006. "Quantitative selection of hedge funds using data envelopment analysis," Post-Print halshs-00067742, HAL.
    • Handle: RePEc:hal:journl:halshs-00067742
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00067742v2
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    References listed on IDEAS

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    Keywords

    hedge funds; data envelopment analysis; fund selection; performance measurement; alternative investment;
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