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Performance persistence and the source of returns for hedge funds

  • A. Harri
  • B. W. Brorsen

Hedge funds exhibit performance persistence if some funds have consistently higher returns than others. Several procedures are used to determine if performance persists. The results show that performance persists in hedge funds with some funds showing the greatest persistence across all procedures. The results also indicate a strong negative relation between hedge fund capitalization and returns, which is consistent with the hypothesis that hedge fund managers exploit market inefficiencies.

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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 2 ()
Pages: 131-141

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Handle: RePEc:taf:apfiec:v:14:y:2004:i:2:p:131-141
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  1. Stephen J. Brown & William N. Goetzmann, 2001. "Hedge Funds With Style," NBER Working Papers 8173, National Bureau of Economic Research, Inc.
  2. Francisca Richter & B. Wade Brorsen, 2000. "Estimating fees for managed futures: a continuous-time model with a knockout feature," Applied Mathematical Finance, Taylor & Francis Journals, vol. 7(2), pages 115-125.
  3. William N. Goetzmann & Stephen J. Brown & James M. Park, 2004. "Conditions for Survival: Changing Risk and the Performance of Hedge Fund Managers and CTAs," Yale School of Management Working Papers ysm10, Yale School of Management.
  4. Terrence Hallahan & Robert Faff, 2001. "Induced persistence or reversals in fund performance?: the effect of survivorship bias," Applied Financial Economics, Taylor & Francis Journals, vol. 11(2), pages 119-126.
  5. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  6. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
  7. 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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