The performance of hedge funds and mutual funds in emerging markets
Journal
Journal of Banking and Finance
ISSN
0378-4266
ISSN-Digital
1872-6372
Type
journal article
Date Issued
2010-08-01
Author(s)
Abstract
Use of short selling and derivatives is limited in most emerging markets because such instruments are not as readily available as they are in developed capital markets. These limitations raise questions about the value added provided by hedge funds, especially compared to traditional mutual funds active in these markets. We use five existing performance measurement models plus a new asset-style factor model to identify the return sources and the alpha generated by both types of funds. We analyze subperiods, different market environments, and structural breaks. Our results indicate that some hedge funds generate significant positive alpha, whereas most mutual funds do not outperform traditional benchmarks. We find that hedge funds are more active in shifting their asset allocation. The higher degree of freedom that hedge funds enjoy in their investment style might thus be one explanation for the differences in performance.
Language
English
Keywords
Hedge funds
Mutual funds
Emerging markets
Performance
Asset-style factor models
HSG Classification
not classified
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
34
Number
8
Start page
1993
End page
2009
Pages
17
Subject(s)
Division(s)
Eprints ID
57520