A Critical Look at the Case for Hedge Funds

Ennis, Richard M.; Sebastian, Michael D.

doi:10.3905/jpm.2003.319899

Cited by 46 publications

(22 citation statements)

References 7 publications

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“…For the period 1990-1998, Edwards and Caglayan (2001) find that only three hedge fund strategies (Market Neutral, Event Driven and Macro) provide protection to investors when stock markets head south. More recently, Ennis and Sebastian (2003) contend that in general, hedge funds did not provide investor protection after the market downturn of March 2000; rather, their superior performance is mostly due to the good market timing of their managers during the US stock market bubble that preceded it.…”

Section: Introductionmentioning

confidence: 99%

Hedge Fund Performance and Persistence in Bull and Bear Markets

Capocci

Corhay

Hübner³

2003

SSRN Journal

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This paper tests the performance of 2894 hedge funds in a time period that encompasses unambiguously bullish and bearish trends whose pivot is commonly set at March 2000. The database proves to be fairly trustable with respect to the most important biases in hedge funds studies, despite the high attrition rate of funds observed in the down market. An original ten-factor composite performance model is applied that achieves very high significance levels. The analysis of performance indicates that most hedge funds significantly outperformed the market during the whole test period, mostly thanks to the bullish subperiod. In contrast, no significant underperformance of individual hedge funds strategies is observed when markets headed south. The analysis of persistence yields very similar results, with most of the predictability being found among middle performers during the bullish period. However, the 'Market Neutral' strategy represents a remarkable exception, as abnormal performance is sustained throughout and significant persistence can be found between the 20% and 69% best performers in this category, probably thanks to an extreme adaptability and a very active investment behaviour.

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Section: Introductionmentioning

confidence: 99%

Hedge Fund Performance and Persistence in Bull and Bear Markets

Capocci

Corhay

Hübner³

2003

SSRN Journal

View full text Add to dashboard Cite

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“…Edwards and Caglayan (2001) find that market neutral hedge fund strategies as well as event-driven and macro hedge fund strategies are the only ones to provide protection to investors in down trending markets. Ennis and Sebastian (2003) find that after the stock market peaked in March of 2000 hedge funds in general did not provide protection to investors; rather it was the managers' good timing of the market. Muhtaseb (2003 and2006) discusses the merits of hedge funds like investing versus long only investing.…”

Section: Literature Reviewmentioning

confidence: 99%

Neutrality of equity market neutral strategy to period and index

Muhtaseb

Colborn

2012

J Deriv Hedge Funds

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and former research director for Global Fund Analysis in London, England. His primary research interest is in portfolio management, especially hedge funds performance, activism and fraud. He has published many research articles in leading journals and run executive seminars and CFA review courses in major financial centers. He holds a PhD in finance from the University of Tennessee, Knoxville. He is a CFA charteholder and CAIA member. ABSTRACT This study examines the performance of equity market neutral (EMN) hedge funds by estimating alpha and beta, using monthly excess returns of the Fidelity Investments Spartan s US Bond Index Fund, 1 the S&P 500 index and two indices of EMN strategies. The study investigates how much exposure to systematic risk is experienced by EMN hedge funds and hence by the investors in such funds. In addition, the article ascertains the stability of the estimated betas of EMN hedge fund indices. Results show that EMN fund indices had no systematic (stock and bond market) risk before the subprime mortgage crises of 2008. During the crises, the DJ Credit Suisse EMN index showed a positive beta in excess of 0.4, yet the Greenwich Van Hedge EMN index showed a beta less than 0.1. Similarly, the DJ Credit Suisse EMN index had no bond market beta up until November 2008. The Greenwich Van Hedge EMN index had almost no exposure to the market. The results were sensitive to market conditions and the EMN index. DJCS and GVH both had positive stock market alphas, which turned insignificant around October 2008. Similarly, both indices had positive bond market alphas, which turned insignificant around August-November 2008. Robert 'Eric' Colborn

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“…Unique factors covered in this study include emerging markets stock and bond indices, non-US stocks, growth-value equity spreads and commodity futures. Similar factors are used by Ennis and Sebastian (2003).…”

Section: Literature Reviewmentioning

confidence: 99%

The role of credit default swaps and other alternative betas in hedge fund factor analysis

Black¹

2012

J Deriv Hedge Funds

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A Critical Look at the Case for Hedge Funds

Cited by 46 publications

References 7 publications

Hedge Fund Performance and Persistence in Bull and Bear Markets

Hedge Fund Performance and Persistence in Bull and Bear Markets

Neutrality of equity market neutral strategy to period and index

The role of credit default swaps and other alternative betas in hedge fund factor analysis

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