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Hedge Fund Characteristics and Performance Persistence: Evidence from 1996–2006

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  • Pavitra Kumar

    (The Brattle Group, 201 Mission Street, Suite 2800, San Francisco CA 94105, USA)

Abstract

This paper investigates the association between selected hedge fund characteristics and persistence in both positive and negative abnormal returns using data from the TASS database between 1996 and 2006. I find that higher fund age, size and illiquidity, after controlling for risk, generate stronger persistence in both short- and long-term positive abnormal returns, or good performance. Therefore, these features appear to signal superior managerial and/or fund skill. Furthermore, funds with higher incentive fees display greater long-run persistence in both good and bad performance, net of fees. These results suggest that incentive fees are increased by both skilled and unskilled, but lucky, funds following good past performance.

Suggested Citation

  • Pavitra Kumar, 2015. "Hedge Fund Characteristics and Performance Persistence: Evidence from 1996–2006," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-43.
  • Handle: RePEc:wsi:qjfxxx:v:05:y:2015:i:02:n:s2010139215500184
    DOI: 10.1142/S2010139215500184
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    References listed on IDEAS

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    1. Rania Hentati-Kaffel & Philippe de Peretti, 2014. "Detecting Performance Persistence of Hedge Funds : A Runs-Based Analysis," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00984777, HAL.
    2. Rania Hentati-Kaffel & Philippe de Peretti, 2014. "Detecting Performance Persistence of Hedge Funds : A Runs-Based Analysis," Working Papers hal-00984777, HAL.
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