Quantitative Selection of Long-Short Hedge Funds
We develop a quantitative model to select hedge funds in the long-short equity sector. The selection strategy is verified on a survivorship-bias-free hedge fund database, from January 1990 to September 2002. We focus on the hedge funds acting exclusively in the U.S. market. We identify Fama-French factors and GSCI as the risk factors. Based on the evidence that many hedge funds do not exhibit persistent performance, we believe that persistent alpha is not generated based on publicly available information and opportunistic changes of exposure with respect to the risk factors. Instead we expect moderate exposure funds to be those who establish investment decisions based on special information or proprietary research. A hedge fund selection strategy is introduced and checked with out-of-sample data. A simulation of hedge funds from 1927 to 2002 is conducted. The funds selected according to our strategy demonstrate superior performance persistently.
|Date of creation:||Jul 2003|
|Contact details of provider:|| Postal: 40 bd. du Pont d'Arve, Case postale 3, CH - 1211 Geneva 4|
Phone: 41 22 / 312 09 61
Fax: 41 22 / 312 10 26
Web page: http://www.swissfinanceinstitute.ch
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fam:rpseri:rp94. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marilyn Barja)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.