Conditions for Survival: Changing Risk and the Performance of Hedge Fund Managers and CTAs

Stephen Brown (), William Goetzmann and James Park

Yale School of Management Working Papers from Yale School of Management

Abstract: We investigate whether hedge fund and commodity trading advisor [CTA] return variance is conditional upon performance in the first half of the year. Our results are consistent with the Brown, Harlow and Starks (1994) findings for mutual fund managers. We find that good performers in the first half of the year reduce the volatility of their portfolios, but not vice-versa. The result that manager "variance strategies" depend upon relative ranking not distance from the high water mark threshold is unexpected, because CTA manager compensation is based on this absolute benchmark, rather than relative to other funds or indices. We conjecture that

Date: 1998-02-01, Revised 2008-04-01
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Related works:
Working Paper: Conditions for Survival: Changing Risk and the Performance of Hedge Fund Managers and CTAs (2008)
Working Paper: Conditions for Survival: Changing Risk and the Performance of Hedge Fund Managers and CTAs (2004)
Working Paper: Conditions for Survival: Changing Risk and the Performance of Hedge Fund Managers and CTAs (1999)
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