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Market Dispersion and the Profitability of Hedge Funds

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  • Gregory Connor

    () (Economics,Finance & Accounting, National University of Ireland, Maynooth)

  • Sheng Li

    (Citigroup)

Abstract

We examine the impact of market dispersion on the performance of hedge funds. Market dispersion is measured by the cross-sectional volatility of equity returns in a given month.Using hedge fund indices and a panel of monthly returns on individual hedge funds, we find that market dispersion and the performance of hedge funds are positively related. We also find that the cross-sectional dispersion of hedge fund returns is positively related to the levelof market dispersion.

Suggested Citation

  • Gregory Connor & Sheng Li, 2009. "Market Dispersion and the Profitability of Hedge Funds," Economics, Finance and Accounting Department Working Paper Series n2000109.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  • Handle: RePEc:may:mayecw:n2000109.pdf
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    Cited by:

    1. Andrew Grant & Steve Satchell, 2016. "Theoretical decompositions of the cross-sectional dispersion of stock returns," Quantitative Finance, Taylor & Francis Journals, vol. 16(2), pages 169-180, February.
    2. Angelidis, Timotheos & Sakkas, Athanasios & Tessaromatis, Nikolaos, 2015. "Stock market dispersion, the business cycle and expected factor returns," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 265-279.

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