Detecting performance persistence of hedge funds

Rania Hentati () and Philippe de Peretti ()
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Rania Hentati: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Philippe de Peretti: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Authors registered in the RePEc Author Service: Jean-Luc Prigent

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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: 2015-06
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Citations: View citations in EconPapers (1)

Published in Economic Modelling, 2015, 47, pp.185-192. ⟨10.1016/j.econmod.2015.02.029⟩

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Working Paper: Detecting performance persistence of hedge funds (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03045892

DOI: 10.1016/j.econmod.2015.02.029

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