Nonparametric Assessment of Hedge Fund Performance

Caio Almeida, Kim Ardison and René Garcia
Additional contact information
Caio Almeida: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Kim Ardison: FGV-EPGE - Universidad de Brazil

Post-Print from HAL

Abstract: We propose a new class of performance measures for Hedge Fund (HF) returns based on a family of empirically identifiable stochastic discount factors (SDFs). The SDF-based measures incorporate no-arbitrage pricing restrictions and naturally embed information about higher-order mixed moments between HF and benchmark factors returns. We provide a full asymptotic theory for our SDF estimators to test for the statistical significance of each fund's performance and for the relevance of individual benchmark factors within each proposed measure. We apply our methodology to a panel of 4815 individual hedge funds. Our empirical analysis reveals that fewer funds have a statistically significant positive alpha compared to the Jensen's alpha obtained by the traditional linear regression approach. Moreover, the funds' rankings vary considerably between the two approaches. Performance also varies between the members of our family because of a different fund exposure to higher-order moments of the benchmark factors, highlighting the potential heterogeneity across investors in evaluating performance. (C) 2019 Elsevier B.V. All rights reserved.

Keywords: Hedge funds; Admissible performance measures; Nonparametric estimation; Higher-order moments (search for similar items in EconPapers)
Date: 2020-02
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Published in Journal of Econometrics, 2020, 214 (2-3), pp.349-378. ⟨10.1016/j.jeconom.2019.08.002⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Nonparametric assessment of hedge fund performance (2020)
Working Paper: Nonparametric Assessment of Hedge Fund Performance (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02550789

DOI: 10.1016/j.jeconom.2019.08.002

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().