Do Hot Hands Exist Among Hedge Fund Managers? An Empirical Evaluation

Ravi Jagannathan, Alexey Malakhov and Dmitry Novikov

No 12015, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine whether hot hands exist among hedge fund managers. In measuring performance persistence, we use hedge fund style benchmarks. This allows us to identify managers with valuable skills, and also to control for option-like features inherent in returns from hedge fund strategies. We take into account the possibility that reported asset values may be based on stale prices. We develop a statistical model that relates a hedge fund's performance to its decision to liquidate or close in order to infer the performance of a hedge fund that left the database. While we find significant performance persistence among superior funds we find little evidence of persistence among inferior funds.

JEL-codes: I1 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-fmk
Note: AP
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Citations: View citations in EconPapers (6)

Published as “Do Hot Hands Exist Among Hedge Fund Managers? An Empirical Evaluation.” forthcoming in Journal of Finance 2009

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Journal Article: Do Hot Hands Exist among Hedge Fund Managers? An Empirical Evaluation (2010)
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