Detecting performance persistence of hedge funds

Rania Hentati-Kaffel and Philippe de Peretti
Authors registered in the RePEc Author Service: Rania HENTATI-KAFFEL

Economic Modelling, 2015, vol. 47, issue C, 185-192

Abstract: In this paper, we use nonparametric runs-based tests to analyze the randomness and the persistence of relative returns of hedge funds. Runs tests are implemented on a universe of hedge funds extracted from HFR database over the period spanning January 2000 to December 2012. Our findings suggest that i) slightly less than 80% of the studied universe has returns at random, ii) a similar figure is found out when focusing on relative returns, iii) hedge funds that do present clustering in their relative returns are mainly found within Event Driven and Relative Value strategies, iv) and for relative returns, results vary with the type of the benchmark nature (peer group average or traditional). This paper also emphasizes that runs tests may be a useful tool for investors in their fund's selection process.

Keywords: Hedge funds; Runs tests; Persistence; Clustering (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:47:y:2015:i:c:p:185-192

DOI: 10.1016/j.econmod.2015.02.029

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