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Hedge funds strategies -are they consistent?

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  • Ribeiro, Mafalda

    ()
    (Universidade Lusófona do Porto (ULP))

  • Santos, C. Machado

    (Universidade Lusófona do Porto (ULP))

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    Abstract

    Alternative investment has grown considerably, transforming this industry in the forefront of investment innovation. Despite their public acknowledgment and profound influence in the financial market, there is still relative small understanding about hedge funds strategies style. This paper intends to determine whether stylistic characterization exists across hedge fund strategies, by comparing, for the period of 1998 to 2008, the performance of the EDHEC indices with one of the most representative indices of hedge funds, the CSFB/Tremont index, regarding seven main strategies. The results do not reject the hypothesis of equal mean monthly returns on every strategy, comparing the two data sources, showing that there is no significant differences between the strategies analyzed, suggesting that the purity in each style is not as developed and accurate as we may suppose.

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    File URL: http://wwwa.uportu.pt/siaa/Investigacao/WP_10_2009.pdf
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    Bibliographic Info

    Paper provided by Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE) in its series Working Papers with number 10/2009.

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    Length: 26 pages
    Date of creation: 30 Nov 2009
    Date of revision:
    Handle: RePEc:ris:cigewp:2009_010

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    Postal: Universidade Portucalense – Economics and Management Department (CIGE – Centro de Investigação em Gestão e Economia), Rua Dr. António Bernardino de Almeida, 541-619, 4200 – 072 Porto, Portugal
    Web page: http://www.uportu.pt/site-scripts/centro_pagina.asp?codmenu=71&codcentro=24
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    Related research

    Keywords: Hedge funds; strategies and style; consistency; purity; bias;

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    1. Chris Brooks & Harry. M Kat, 2001. "The Statistical Properties of Hedge Fund Index Returns," ICMA Centre Discussion Papers in Finance icma-dp2001-09, Henley Business School, Reading University.
    2. Josef Lakonishok & Robert W. Vishny & Andrei Shleifer, 1993. "Contrarian Investment, Extrapolation, and Risk," NBER Working Papers 4360, National Bureau of Economic Research, Inc.
    3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    4. Brown, Stephen J & Goetzmann, William N, 1995. " Performance Persistence," Journal of Finance, American Finance Association, vol. 50(2), pages 679-98, June.
    5. Stephen J. Brown, 2001. "Careers and Survival: Competition and Risk in the Hedge Fund and CTA Industry," Journal of Finance, American Finance Association, vol. 56(5), pages 1869-1886, October.
    6. Stephen Brown & William Goetzmann, 2001. "Hedge Funds With Style," Yale School of Management Working Papers ysm21, Yale School of Management, revised 01 Apr 2008.
    7. 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.
    8. 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.
    9. Malkiel, Burton G, 1995. " Returns from Investing in Equity Mutual Funds 1971 to 1991," Journal of Finance, American Finance Association, vol. 50(2), pages 549-72, June.
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