On the Performance of Hedge Funds

Liang, Bing

doi:10.2469/faj.v55.n4.2287

Cited by 476 publications

(271 citation statements)

References 11 publications

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“…For studies of pension fund performance, see Ferson and Khang (2002); Lakonishok, Shleifer, and Vishny (1992); Coggin, Fabozzi, and Rahman (1993); Christopherson, Ferson, and Glassman (1998); Delguercio and Tkac (2002); Coggin and Trzcinka (2000); and Ikenberry, Shockley, and Womack (1998). In analyses of hedge funds, Ackermann, McEnally, and Ravenscraft (1999); Brown, Goetzmann, and Ibbotson (1999); Liang (1999); and Agrawal and Naik (2000) provide evidence of superior returns, though Amin and Kat (2003) argue that hedge fund performance results may be attributable to the skewed nature of hedge fund payoffs, which when appropriately accounted for, renders hedge fund performance unremarkable.…”

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confidence: 99%

Just How Much Do Individual Investors Lose By Trading?

et al. 2007

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Individual investor trading results in systematic and economically large losses. Using a complete trading history of all investors in Taiwan, we document that the aggregate portfolio of individuals suffers an annual performance penalty of 3.8 percentage points. Individual investor losses are equivalent to 2.2% of Taiwan's gross domestic product or 2.8% of the total personal income. Virtually all individual trading losses can be traced to their aggressive orders. In contrast, institutions enjoy an annual performance boost of 1.5 percentage points, and both the aggressive and passive trades of institutions are profitable. Foreign institutions garner nearly half of institutional profits. (JEL G11, G14, G15, H31) Financial advisers recommend that individual investors refrain from frequent trading. Investors should buy and hold diversified portfolios, such as low-cost mutual funds. If skill contributes to investment returns, individual investors are obviously at a disadvantage when trading against professionals. What is less clear is just how much do individual investors lose by trading? In this paper, we document that trading in financial markets leads to economically large losses for individual investors and virtually all of the losses of individual investors

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confidence: 99%

Just How Much Do Individual Investors Lose By Trading?

et al. 2007

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“…However, shorter lock-up periods might force fund managers to perform better than their peers because of the threat of an abrupt capital withdrawal after bad performance. Empirically, however, Liang (1999), Aragon (2007) and Agarwal et al (2009) find a statistically significant, positive relation between the length of lock-up/restriction period and the risk-adjusted hedge fund return.…”

Section: Fund Characteristics and Riskadjusted Performancementioning

confidence: 83%

“…Only when market frictions such as insolvency costs and taxes are present, leverage might affect performance. Empirically, Liang (1999) documents that hedge funds using leverage only slightly outperform their peers in terms of returns, while having a higher SD of returns. Schneeweis et al (2005) find only small differences in risk-adjusted performance depending on leverage.…”

Section: Fund Characteristics and Riskadjusted Performancementioning

confidence: 99%

Factors that affect the performance of distressed securities hedge funds

Bontschev¹,

Eling

2013

J Deriv Hedge Funds

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We present a four factor model to replicate distressed securities hedge fund returns. The model considers the returns of short put options, a short straddle on bonds, the spread between high yield and Treasury bonds, and stocks with small market capitalization. On the basis of this model, we conduct a multivariate analysis of how fund characteristics affect risk-adjusted performance. A high-water mark and performance-based compensation are positively related to risk-adjusted performance, which is in line with much of the hedge fund literature. In contrast to other work, however, we find that lock-up is negatively related to performance and that fund age is unrelated to performance. Our work provides a better understanding of the nature and critical factors for the success of distressed securities hedge funds.

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“…The first category encompasses studies comparing and contrasting hedge fund performance to that of various indices, such as Ackermann et al (1999), Liang (1999) and Capocci and Hubner (2004). The second category offers comparisons of hedge fund performance to that of mutual funds, as studied by Ackermann et al (1999) and Liang (1999), who conclude that hedge funds, as a group, perform better than mutual funds on a risk-adjusted basis. Finally, research to analyze, define and categorize hedge fund investment styles and performance.…”

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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On the Performance of Hedge Funds

Cited by 476 publications

References 11 publications

Just How Much Do Individual Investors Lose By Trading?

Just How Much Do Individual Investors Lose By Trading?

Factors that affect the performance of distressed securities hedge funds

Neutrality of equity market neutral strategy to period and index

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