Publication Type

Working Paper

Publication Date

6-2003

Abstract

This study explores the return persistence properties, styles, and fund characteristics of hedge funds that mainly invest in Asia. We examine, for the first time, a high resolution hedge fund dataset which includes monthly return information as well as detailed fund characteristics data. We find that the returns of Asian hedge funds persist most strongly at monthly horizons to quarterly horizons. This persistence weakens considerably when we lengthen the measurement period beyond a quarter, and does not appear to be due to the imputation of fees or to systematic risk as measured by a simple factor model. Further, we show that Asian funds comove largely with a common Asian equity markets component. Other major components that explain the cross-sectional variation in Asian hedge fund returns include a CTA component, two macro components, and three multi-strategy components. The seven style components in total explain about 64% of the variation in returns. Next, we study the relationship between the cross-section of fund returns and fund characteristics. We document a positive relationship between holding firm size and fund returns which is consistent with an "economies of scale" explanation. Moreover, we find that funds with higher redemption (lockup) periods achieve higher returns on average due to their ability to extricate from their positions in a timely fashion in the face of redemptions. However, there is no evidence to suggest that funds with higher expenses (management and performance fees) achieve higher returns.

Keywords

Asian hedge funds, hedge funds, style, persistence, fees

Discipline

Asian Studies | Finance and Financial Management

Research Areas

Finance

First Page

1

Last Page

42

Identifier

10.2139/ssrn.416960

Publisher

SSRN

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.2139/ssrn.416960

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