An advanced perspective on the predictability in hedge fund returns

Christian Wegener, Rüdiger von Nitzsch and Cetin Cengiz

Journal of Banking & Finance, 2010, vol. 34, issue 11, 2694-2708

Abstract: This paper advances the research on the predictability in hedge fund returns, using a broad set of risk factors within a variety of different prediction models. Accounting for the fact that returns are non-normally distributed, heteroscedastic and time-varying in their exposure to pervasive economic risk factors, we advocate a non-parametric backward elimination regression approach. The interdependencies between the monthly changes of envisaged risk factors and the subsequent hedge fund returns remain remarkably stable in terms of the observed direction of impact. Thus, taking into account the specific characteristics of this asset class, we find strong evidence of its return predictability.

Keywords: Return; predictability; Non-parametric; estimation; Meta; hedge; fund; indices; In-sample; break; point; model; Risk; factors (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:11:p:2694-2708

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