Recent advances in hedge funds' performance attribution: Performance persistence and fundamental factors

Stafylas, Dimitrios; Anderson, Keith; Uddin, Moshfique

doi:10.1016/j.irfa.2015.11.001

Cited by 10 publications

(6 citation statements)

References 39 publications

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“…Interesting findings concerning the phenomenon under study were presented by Stafylas et al (2016), who proved that hedge funds can maintain their performance in the short and long term, and also pointed out that as regards age and size, small and young funds were more likely to maintain positive rates of return. Sun et al (2018) provided evidence that fund managers are unlikely to ensure performance persistence and that hedge fund performance is persistent following a period of underperformance.…”

Section: Literature Reviewmentioning

confidence: 98%

Quasi-hedge funds market in Poland in view of their performance persistence

Aspadarec

2021

Investment Management and Financial Innovations

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Performance persistence analysis is important as it has a decisive influence on investor allocation decisions. Investors can use quasi-hedge funds’ persistence to build effective investment strategies. Thus, the paper explores performance persistence of quasi-hedge funds operating at the Polish capital market. The methodology is based on constructing the new market performance index intended only for absolute return funds. It is validated regarding absolute returns of Polish quasi-hedge funds. The Absolute Return Index (ARI) is used to rate quasi-hedge funds’ performance persistence in assessing their fundamental purpose: to deliver consistently positive returns in all market conditions. For this, their quarterly return rates are used. All 53 funds operating for at least 36 months and representing 48.2% of the entire segment of absolute return funds are analyzed. The use of ARI allows examining quasi-hedge funds’ performance persistence in terms of market changes and the assessment of their purpose. In the short term (6 months) profitability remained persistent, while in the long term (12 months) such a hypothesis could be refuted. More than 40% of funds showed positive persistence within six months; only positive persistence occurred in the short term. 9.4% of funds repeatedly obtained negative returns, so absolute return funds’ negative performance persisted neither in the short nor long term. Closed-ended investment funds showed much stronger persistence of above-average positive returns, which additionally tended to avoid repeating negative returns in two-quarter and four-quarter series. This confirms the assumption that in this respect the Polish market is similar to the developed ones.

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Section: Literature Reviewmentioning

confidence: 98%

Quasi-hedge funds market in Poland in view of their performance persistence

Aspadarec

2021

Investment Management and Financial Innovations

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“…Linear multi factor models are used to measure hedge fund performance in several studies, like Schneeweis and Spurgin (1999), Capocci (2002) or Jordao and De Moura (2011). Despite the application to hedge fund performance, the linear models are more suitable to evaluate traditional funds because they fail to capture hedge fund characteristics like time variation (Stafylas et al 2017). Furthermore, Slavutskaya (2013) concluded that linear factor models are not suitable for hedge funds as they lead to over-parameterisation, because many hedge funds have a life of three years.…”

Section: Performance Measurement Modelsmentioning

confidence: 99%

“…Although non-linear multifactor models can explain hedge fund returns in a more detailed way and account for special characteristics of hedge funds, they might not be best for investors' performance evaluation. This is mainly due to the fact that exposures are not static and, therefore, need to be adjusted and that the models and factors are complicated to replicate (Stafylas et al 2017).…”

Section: Performance Measurement Modelsmentioning

confidence: 99%

Hedge Fund Performance during and after the Crisis: A Comparative Analysis of Strategies 2007–2017

METZGER

Shenai

2019

IJFS

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The performance of hedge funds is of interest to investors looking for ways of generating value over passive strategies, particularly in bad times. This study used the Hedge Index database with over 9500 hedge funds to analyse, in depth, the performance of ten major strategies, during and after the financial crisis (June 2007–January 2017). To the best of our knowledge, such a study covering the last ten years has not been published. Performance of the various strategies was analysed, using correlations, the Carhart’s four factor model, persistence of performance, and reward-risk ratios. The findings are that some hedge fund strategies which have persistent performances are also able to outperform the benchmark in some periods. In the crisis period, value-wise, all strategies did better than the S&P500, thereby, conserving value for investors, better than passive investment in the S&P500. Over the entire period of the research (June 2007–January 2017), seven strategies performed better than the S&P500: Global Macro, Multi Strategy, Emerging Markets, Long/Short Equity, Event Driven, Convertible Arbitrage, and Fixed Income Arbitrage. As hedge funds typically have skewed return distributions, performance was analysed in different periods, within conventional and downside risk frameworks. This research contributes to the advancement of knowledge on the outcomes of hedge fund strategies in different market conditions and the reliability of alternative risk frameworks in their evaluation. Apart from the theoretical implications, this research provides practical knowledge to managers and investors on which strategies hold better value and in what circumstances.

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“…In addition, according to their results, the performance of the various classes of mutual funds seemed to be invariant relative to market conditions. Stafylas et al [17] pointed out several factors that influence hedge fund performance, namely size, age and fees. Hwang et al [18] concluded that systemic risk is a prevailing cause of cross-sectional deviations in hedge fund returns.…”

Section: Literature Reviewmentioning

confidence: 99%

A Markov Regime Switching Approach towards Assessing Resilience of Romanian Collective Investment Undertakings

et al. 2019

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This paper explores the sensitivity of Romanian collective investment undertakings’ returns to changes in equity, fixed income and foreign exchange market returns. We use a sample of 80 open-end investment funds and pension funds with daily returns between 2016 and 2018. Our methodology consists of measuring changes in the daily conditional volatility for the fund returns (EGARCH) and changes in their conditional correlation with selected market risk factors (DCC MV-GARCH) throughout different volatility regimes identified using a Markov Regime Switching model. We argue that, on average, the level of conditional correlations between funds and market risk factors remained stable and unconcerned by the volatility regimes. In addition, for only less than half of the funds in the sample, their volatility regimes were synchronized with those of the selected market risk factors. We found that, on average, fund returns are more correlated with equity returns and less correlated with changes in local bond yields, while not being significantly influenced by changes in foreign bond yields or changes in foreign exchange. During the period investigated equity returns were the most volatile while the funds returns volatility were, on average, much more reduced. Overall, our results show the resilience of the Romanian collective investment sector to the selected market risk factors, during the investigated period.

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Recent advances in hedge funds' performance attribution: Performance persistence and fundamental factors

Cited by 10 publications

References 39 publications

Quasi-hedge funds market in Poland in view of their performance persistence

Quasi-hedge funds market in Poland in view of their performance persistence

Hedge Fund Performance during and after the Crisis: A Comparative Analysis of Strategies 2007–2017

A Markov Regime Switching Approach towards Assessing Resilience of Romanian Collective Investment Undertakings

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