EconPapers    
Economics at your fingertips  
 

Only Winners in Tough Times Repeat: Hedge Fund Performance Persistence over Different Market Conditions

Zheng Sun, Ashley W. Wang and Lu Zheng

No 2016-030, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)

Abstract: We provide novel evidence that hedge fund performance is persistent following weak hedge fund markets, but is not persistent following strong markets. Specifically, we construct two performance measures, DownsideReturns and UpsideReturns, conditioned on the level of overall hedge fund sector returns. After adjusting for risks, funds in the highest DownsideReturns quintile outperform funds in the lowest quintile by about 7% in the subsequent year, whereas funds with better UpsideReturns do not outperform subsequently. The DownsideReturns can predict future fund performance over a horizon as long as 3 years, for both winners and losers, and for funds with few share restrictions.

Keywords: Conditional performance; Hedge funds; Performance Persistence (search for similar items in EconPapers)
JEL-codes: G10 G23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
Date: 2016-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.federalreserve.gov/econresdata/feds/2016/files/2016030pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-30

Ordering information: This working paper can be ordered from
http://www.federalre ... /feds/fedsorder.html

DOI: 10.17016/FEDS.2016.030

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ().

 
Page updated 2019-07-18
Handle: RePEc:fip:fedgfe:2016-30