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Persistent Doubt: An Examination of Hedge Fund Performance
Author(s) -
dela O. González María,
Papageorgiou Nicolas A.,
Skinner Frank S.
Publication year - 2016
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12070
Subject(s) - sharpe ratio , hedge fund , ranking (information retrieval) , contrast (vision) , information ratio , economics , sample (material) , actuarial science , econometrics , persistence (discontinuity) , monetary economics , business , financial economics , computer science , portfolio , finance , chemistry , artificial intelligence , geotechnical engineering , chromatography , engineering
We examine whether performance persistence is suspicious. Top quintile portfolios formed on the Sharpe ratio, alpha, and information ratio persistently outperform similarly constructed mediocre third quintile portfolios throughout our sample period, but performance is more modest and less persistent when portfolios are formed on the excess manipulation‐proof performance measure (EMPPM). By selecting funds formed on ranking by Sharpe and information ratios, investors also select funds that have persistently doubtful performance according to the doubt ratio. In contrast, portfolios formed on alphas and especially the EMPPM have much less excess and persistent doubt.