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The persistence in hedge fund performance: extended analysis

  • Daniel P. J. Capocci

    (KBL European Private Bankers, Luxembourg School of Finance-Luxembourg University)

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    This study analyses and decomposes hedge fund returns to detect a systematic hedge fund selection criterion that enables investors to consistently and significantly outperform classical equities and bond indices over a full market cycle and over bullish and bearish market periods. The methodology used is adapted from Capocci and Hübner. The measures used include the returns, the volatility, the Sharpe score, the alpha, the beta, the skewness and the kurtosis. Measures incorporating the volatility display very strong ability to assist investors in creating alpha and consistently and significantly outperform classical indices. A sub-period analysis is performed to check the robustness of the results. Copyright © 2008 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/ijfe.371
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    Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

    Volume (Year): 14 (2009)
    Issue (Month): 3 ()
    Pages: 233-255

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    Handle: RePEc:ijf:ijfiec:v:14:y:2009:i:3:p:233-255
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    1. Stephen J. Brown & William N. Goetzmann & Bing Liang, 2004. "Fees on Fees in Funds of Funds," Yale School of Management Working Papers ysm18, Yale School of Management.
    2. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    3. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    4. Kramer, Charles, 1994. " Macroeconomic Seasonality and the January Effect," Journal of Finance, American Finance Association, vol. 49(5), pages 1883-91, December.
    5. 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.
    6. Fung, William & Hsieh, David A, 1997. "Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 275-302.
    7. Vikas Agarwal, 2004. "Risks and Portfolio Decisions Involving Hedge Funds," Review of Financial Studies, Society for Financial Studies, vol. 17(1), pages 63-98.
    8. Agarwal, Vikas & Naik, Narayan Y., 2000. "Multi-Period Performance Persistence Analysis of Hedge Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(03), pages 327-342, September.
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