Economics at your fingertips  

Unobserved Performance of Hedge Funds

Vikas Agarwal (), Stefan Ruenzi () and Florian Weigert ()

No 1825, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: We investigate hedge funds’ unobserved performance (UP), measured as the risk-adjusted return difference between a fund firm’s reported return and the hypothetical portfolio return derived from its disclosed long equity holdings. We find that high UP is (i) positively associated with measures of managerial incentives, discretion, and skill, and (ii) driven by a fund firm’s frequent trading in equity positions, derivatives usage, short selling, and confidential holdings. Fund firms with high UP outperform fund firms with low UP by more than 6% p.a. after accounting for typical hedge fund risk factors and fund characteristics.

Keywords: Confidential Holdings; Derivative Usage; Discretion; Frequent Trading; Hedge Funds; Managerial Incentives; Short Selling; Unobserved Performance (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2018-12
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Working Paper: Unobserved performance of hedge funds (2020) Downloads
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:

Access Statistics for this paper

More papers in Working Papers on Finance from University of St. Gallen, School of Finance Contact information at EDIRC.
Bibliographic data for series maintained by ().

Page updated 2023-12-07
Handle: RePEc:usg:sfwpfi:2018:25