Has Hedge Fund Alpha Disappeared?

Item Type Journal paper
Abstract

This paper investigates the alpha generation of the hedge fund industry based on a recent sample compiled from the Lipper/TASS database covering the time period from January 1994 to September 2008. We find a positive average hedge fund alpha in the cross-section for the majority of strategies and a positive and significant alpha for roughly half of all funds. Moreover, the alpha of three-quarter of the strategy indices is positive and significant in the time series. A comparison of a factor model in which the risk factors are selected based on a stepwise regression approach and the widely used factor model proposed by Fung and Hsieh (2004) reveals that the estimated alpha is robust with respect to the choice of the factor model. In contrast to prior research, we find no evidence of a decreasing hedge fund alpha over time. Moreover, based on our sample, we cannot confirm prior evidence pointing to capacity constraints in the hedge fund industry.

Authors Ammann, Manuel; Schmid, Markus & Huber, Otto
Journal or Publication Title Journal of Investment Management JOIM
Language English
Keywords Hedge Funds, Performance, Alpha, Factor Models, Capacity Constraints
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date February 2011
Publisher Stallion Press
Place of Publication Lafayette
Volume 9
Number 1
Page Range 50-71
Number of Pages 22
ISSN 1545-9144
ISSN-Digital 1545-9152
Depositing User Prof. Dr. Manuel Ammann
Date Deposited 22 Jun 2010 14:58
Last Modified 23 Aug 2016 11:08
URI: https://www.alexandria.unisg.ch/publications/64237

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Citation

Ammann, Manuel; Schmid, Markus & Huber, Otto (2011) Has Hedge Fund Alpha Disappeared? Journal of Investment Management JOIM, 9 (1). 50-71. ISSN 1545-9144

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https://www.alexandria.unisg.ch/id/eprint/64237
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