Beta Active Hedge Fund Management

Jun Duanmu, Alexey Malakhov and William R. McCumber

Journal of Financial and Quantitative Analysis, 2018, vol. 53, issue 6, 2525-2558

Abstract: We reconsider whether hedge funds’ time-varying risk factor exposures are predictive of superior performance. We construct an overall measure (BA) of fund managers and present evidence that top beta active managers deliver superior long-term out-of-sample performance compared to top alpha active managers. BA captures the time-varying nature of beta exposures and can be interpreted as a common factor of both systematic risk (SR) and (1 - R2) measures. BA also compares favorably to extant measures of market timing, capturing the explanatory power of such measures of hedge fund performance.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:53:y:2018:i:06:p:2525-2558_00

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