Hedge Fund Managers: Luck and Dynamic Assessment

Gilles Criton and Olivier Scaillet

Bankers, Markets & Investors, 2014, issue 129, 28-38

Abstract: This paper outlines a new technique that considers the dynamics of hedge funds and controls for the proportion of true alphas. This methodology enabled us to analyze alphas and betas of hedge fund managers differently than the approaches commonly applied. Through this work, we proved that alphas generated by hedge fund managers’ dynamic strategies are not consistent within strategy and across different market conditions. Moreover, our work analyzed market exposures during two periods of economic crisis, illustrating heterogeneity within each strategy. We revealed that, regardless of the strategy, exposures are concentrated on the credit spread and bond risk factors.

Keywords: Hedge Fund Performance; time-varying coefficient; Nonparametric estimation; Kernel methods; Multiple structural breaks; Multiple hypothesis testing; False discovery rate (search for similar items in EconPapers)
JEL-codes: C12 C13 C14 C22 G11 G23 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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