Publication Type
Working Paper
Version
publishedVersion
Publication Date
2-2005
Abstract
We apply a robust bootstrap to evaluate the performance of a large universe of hedge funds. Our bootstrap estimates indicate that the performance of the top hedge funds cannot be attributed to chance alone. This is true even after adjusting for back fill bias, serial correlation, and structural breaks. Also, we find that hedge fund alpha differences persist over three year horizons. However, an investment strategy designed around this will run into difficulties as the persistence is often confined to small funds that are effectively closed to new inflows. Moreover, Bayesian estimates suggest that standard alphas may be overestimated by 41% for the average top fund.
Keywords
Hedge funds, bootstrap, alpha, persistence
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
First Page
1
Last Page
50
Identifier
10.2139/ssrn.675765
Publisher
SSRN
Citation
KOSOWSKI, Robert; NAIK, Narayan Y.; and TEO, Melvyn.
Is stellar hedge fund performance for real?. (2005). 1-50.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5370
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.675765