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Further Evidence on Hedge Funds Performance

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Author Info
Christiansen, Claus Bang (Department of Finance, Aarhus School of Business)
Madsen, Peter Brink (Department of Finance, Aarhus School of Business)
Christensen, Michael () (Department of Finance, Aarhus School of Business)
Abstract

In this analysis we identify dynamic hedge fund strategies quantitatively pursuing a Principal Component Analysis following Fung and Hsieh (1997). We extract five dominant hedge

fund strategies each representing similar investment styles and analyse the performance of each strategy by employing a multi-factor model comprising both market indices and passive option strategies along the lines of Agerwal and Naik (2000).

We find that the majority of the five homogenous strategies show superior performance. However, correcting for survivorship bias this superior performance disappears.

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Publisher Info
Paper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 03-5.

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Length: 31 pages
Date of creation: 05 Dec 2003
Date of revision:
Handle: RePEc:hhb:aarfin:2003_005

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Postal: The Aarhus School of Business, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
Fax: + 45 86 15 19 43
Web page: http://www.asb.dk/about/departments/bs.aspx
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Related research
Keywords: Hedge funds; Investment in securities; Performance; Dynamic strategies; Hedge funds performance;

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mark Mitchell, 2001. "Characteristics of Risk and Return in Risk Arbitrage," Journal of Finance, American Finance Association, vol. 56(6), pages 2135-2175, December. [Downloadable!] (restricted)
  2. Merton, Robert C, 1981. "On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts," Journal of Business, University of Chicago Press, vol. 54(3), pages 363-406, July. [Downloadable!] (restricted)
  3. Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," Journal of Business, University of Chicago Press, vol. 54(4), pages 513-33, October. [Downloadable!] (restricted)
  4. Dybvig, Philip H & Ross, Stephen A, 1985. " Differential Information and Performance Measurement Using a Security Market Line," Journal of Finance, American Finance Association, vol. 40(2), pages 383-99, June. [Downloadable!] (restricted)
  5. Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March. [Downloadable!] (restricted)
  6. Daniel Capocci, 2002. "An Analysis of Hedge Fund Performance," Finance 0210001, EconWPA. [Downloadable!]
  7. Fung, William & Hsieh, David A, 1997. "Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 10(2), pages 275-302.
  8. Fung, William & Hsieh, David A., 1999. "A primer on hedge funds," Journal of Empirical Finance, Elsevier, vol. 6(3), pages 309-331, September. [Downloadable!] (restricted)
  9. Liang, Bing, 2000. "Hedge Funds: The Living and the Dead," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(03), pages 309-326, September. [Downloadable!]
  10. Carl Ackermann & Richard McEnally & David Ravenscraft, 1999. "The Performance of Hedge Funds: Risk, Return, and Incentives," Journal of Finance, American Finance Association, vol. 54(3), pages 833-874, 06. [Downloadable!] (restricted)
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