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Do Hot Hands Exist among Hedge Fund Managers? An Empirical Evaluation
Author(s) -
JAGANNATHAN RAVI,
MALAKHOV ALEXEY,
NOVIKOV DMITRY
Publication year - 2010
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2009.01528.x
Subject(s) - hedge fund , open end fund , returns based style analysis , hedge accounting , business , performance fee , persistence (discontinuity) , alternative beta , fund of funds , fund administration , order (exchange) , style analysis , actuarial science , empirical evidence , target date fund , manager of managers fund , asset (computer security) , finance , financial economics , asset allocation , economics , institutional investor , computer science , market liquidity , philosophy , corporate governance , geotechnical engineering , computer security , epistemology , engineering , portfolio
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. Although we find significant performance persistence among superior funds, we find little evidence of persistence among inferior funds.