Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance

Fan Yang, Tomas Havranek, Zuzana Irsova and Jiri Novak
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Fan Yang: Charles University, Prague

No 2024/15, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: We examine the factors influencing published estimates of hedge fund performance. Using a sample of 1,019 intercept terms from regressions of hedge fund returns on risk factors (the “alphas†) collected from 74 studies, we document a strong downward trend in the reported alphas. The trend persists even after controlling for heterogeneity in hedge fund characteristics and research design choices in the underlying studies. Estimates of current performance implied by best practice methodology are close to zero across all common hedge fund strategies. Additionally, our data allow us to estimate the mean management and performance fees charged by hedge funds. We also document how reported performance estimates vary with hedge fund and study characteristics. Overall, our findings indicate that, while hedge funds historically generated positive value for investors, their ability to do so has diminished substantially.

Keywords: hedge funds; alpha; fees; meta-analysis; model uncertainty (search for similar items in EconPapers)
JEL-codes: J23 J24 J31 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2024-04, Revised 2024-04
New Economics Papers: this item is included in nep-fmk and nep-inv
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Related works:
Working Paper: Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance (2024)
Working Paper: Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance (2024)
Working Paper: Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance (2024)
Working Paper: Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance (2024)
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