OAW

Nonparametric Assessment of Hedge Fund Performance

Almeida, Caio, Ardison, Kim and Garcia, René (2019) Nonparametric Assessment of Hedge Fund Performance. TSE Working Paper, n. 19-1024, Toulouse

[img]
Preview
Text
Download (1MB) | Preview
Official URL: https://www.tse-fr.eu/sites/default/files/TSE/docu...

Abstract

We propose a new class of performance measures for Hedge Fund (HF) returns
based on a family of empirically identiable stochastic discount factors (SDFs). The
SDF-based measures incorporate no-arbitrage pricing restrictions and naturally embed
information about higher-order mixed moments between HF and benchmark
factors returns. We provide a full asymptotic theory for our SDF estimators to test
for the statistical signicance of each fund's performance and for the relevance of
individual benchmark factors within each proposed measure. We apply our methodology
to a panel of 4815 individual hedge funds. Our empirical analysis reveals that
fewer funds have a statistically signicant positive alpha compared to the Jensen's
alpha obtained by the traditional linear regression approach. Moreover, the funds'
rankings vary considerably between the two approaches. Performance also varies
between the members of our family because of a dierent fund exposure to higherorder
moments of the benchmark factors, highlighting the potential heterogeneity
across investors in evaluating performance.

Item Type: Monograph (Working Paper)
Language: English
Date: July 2019
Place of Publication: Toulouse
Uncontrolled Keywords: Hedge Funds, Admissible Performance Measures, Nonparametric Estimation, Higher-order Moments
JEL codes: C14 - Semiparametric and Nonparametric Methods
G12 - Asset Pricing; Trading volume; Bond Interest Rates
G13 - Contingent Pricing; Futures Pricing
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 17 Jul 2019 09:30
Last Modified: 19 Sep 2019 12:33
OAI ID: oai:tse-fr.eu:123176
URI: http://publications.ut-capitole.fr/id/eprint/32628

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year