Download or read book Survival Look ahead Bias Ant and the Persistence in Hedge Fund Performance written by and published by . This book was released on 2002 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Survival Look Ahead Bias and the Persistence in Hedge Fund Performance written by Guillermo Baquero and published by . This book was released on 2009 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we analyze the persistence in the performance of hedge funds taking into account look-ahead bias (multi-period sampling bias). To do so, we model liquidation of hedge funds and analyze how it depends upon historical performance. Next, we use a weighting procedure that eliminates look-ahead bias in measures for performance persistence. In contrast to earlier results for mutual funds, the impact of look-ahead bias is exacerbated for hedge funds due to their greater level of total risk. At the four quarter horizon, look-ahead bias can be as large as 3.8%, depending upon the decile of the distribution. At the quarterly level, we find positive persistence in hedge fund returns, also after correcting for investment style. The empirical pattern at the annual level is also consistent with positive persistence, but its statistical significance is weak.
Download or read book Survival Look Ahead Bias and Persistence in Hedge Fund Performance written by Guillermo Baquero and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the performance persistence in hedge funds taking into account look-ahead bias (multi-period sampling bias). We model liquidation of hedge funds by analyzing how it depends upon historical performance. Next, we use a weighting procedure that eliminates look-ahead bias in measures for performance persistence. In contrast to earlier results for mutual funds, the impact of look-ahead bias is exacerbated for hedge funds due to their greater level of total risk. At the four-quarter horizon, look-ahead bias can be as much as 3.8%, depending upon the decile of the distribution. We find positive persistence in hedge fund quarterly returns after correcting for investment style. The empirical pattern at the annual level is also consistent with positive persistence, but its statistical significance is weak.
Download or read book Survival Look Ahead Bias and the Performance of Hedge Funds written by Guillermo Baquero and published by . This book was released on 2007 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge funds databases are typically subject to high attrition rates because of fund termination and self-selection. Even when all funds are included up to their last available return, one cannot prevent that ex post conditioning biases affect standard estimates of performance persistence. In this paper we analyze the persistence in the performance of U.S. hedge funds taking into account look-ahead bias (multi-period sampling bias). To do so, we model attrition of hedge funds and analyze how it depends upon historical performance. Next, we use a weighting procedure that eliminates look-ahead bias in measures for performance persistence. The results show that the impact of look-ahead bias is quite severe, even though positive and negative survival-related biases are sometimes suggested to cancel out.
Download or read book Eliminating Look Ahead Bias in Evaluating Persistence in Mutual Fund Performance written by Jenke ter Horst and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Performance persistence studies typically suffer from ex-post conditioning biases. As stressed by Carhart (1997a) and Carpenter and Lynch (1999), standard methods of analysis on a survivorship free sample are subject to look-ahead biases. In this paper, we show how one can easily correct for look-ahead bias using weights based on probit regressions.First, we model how survival probabilities depend upon historical returns, fund age and aggregate economy-wide shocks, using two samples of US based 'income' and 'growth' funds. Subsequently, we employ a Monte Carlo study to analyze the size and shape of the look-ahead bias in performance persistence that arise when a survivorship free sample is used with standard techniques. In particular, we show that look-ahead bias induces a spurious U-shaped pattern in performance persistence. Finally, we demonstrate how a weighting procedure based upon probit regressions can be used to correct for this bias. In this way, we obtain look-ahead bias-corrected estimates of abnormal performance relative to a one-factor and the Carhart (1997b) four-factor model, as well as its persistence. The results suggest that in this sample, look-ahead bias is of minor importance and does not seriously affect estimates of persistence. Our bias-corrected results closely correspond to the findings of Carhart (1997b), implying that there is no evidence on a risk-adjusted basis for persistence in performance.
Download or read book Fund Liquidation Self Selection and Look Ahead Bias in the Hedge Fund Industry written by Jenke ter Horst and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A wide range of empirical biases hampers hedge fund databases. In this paper we focus upon survival-related biases and disentangle look-ahead biases due to self-selection of funds and due to fund termination. Self-selection arises because funds voluntarily report their information to data vendors and may decide to stop doing so. By extending existing methodology, we analyze persistence in hedge fund performance over the period 1994 2000, taking into account the above biases. The results show that look-ahead biases due to liquidation and self-selection enforce each other and may lead to overestimating expected returns by as much as 8% per year. Overall, the results are consistent with positive persistence in hedge fund returns at horizons of two and four quarters.
Download or read book Biases in Hedge Funds Indices written by Vinzenz Benedikt and published by GRIN Verlag. This book was released on 2009-07 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2005 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 5,5 (1,5 in GER), University of St. Gallen, course: Doktorandenseminar; Corporate Finance, 49 entries in the bibliography, language: English, abstract: Nowadays, modern investors are well informed by Hedge Funds managers who are not getting tired promoting the merit of investing in hedge funds. These advisers draw elaborated graphs showing the benefits of hedge funds to an active managed portfolio. Investors have to believe in the advantages of shifting a significant part of their portfolio to hedge funds. In terms of the classical risk and return measures the advisers are right, high returns, low volatility and above all low correlations to the other asset classes in the portfolio. But as we know only the half is true. The misleading picture of volatility if measured with the classical portfolio instruments and the correlation effects is not solved in this paper. The research interest in this short paper is the distorted picture of returns given by the Hedge Funds Indices because of biases inherent to those indices. This paper gives an overview of the Hedge Funds Industry and the Hedge Funds Indices that are currently used by investors and highlights the differences between Hedge Funds and traditional Mutual Funds Indices. The problems of setting up those indices because of Hedge Fund idiosyncrasies are discussed. It is also shown why the performance of these indices is misleading due to construction problems. These systematic errors in the Indices are called biases. The paper provides an overview of the biases that can occur, when an Index is set up and why. We will introduce a classification of biases based on three phases. There will be an emphasis on the most popular bias, which is the survivorship bias. To support the existence of biases, the paper gives an overview of some empirical studies, which in general showed quite significant bia
Download or read book Hedge Fund Persistence Performance written by Bernad Kevin and published by LAP Lambert Academic Publishing. This book was released on 2014-02 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent literature has found some evidence of performance persistence in hedge funds. This study investigated whether this persistence varies with fund characteristics over the time period from January 2000 to December 2012. We confront hedge funds by a classification based on their strategy issued from a merged sample from the HFR Hedge funds Indexes databases. We use the benchmarked hedge fund indexes returns against the S&P500 to obtain relative returns. Our sample is composed of monthly data, representing 154 observations. Our aim is to analyze the serial correlation of these corrected dataset by running different tests. After a graphical and an autocorrelation analysis, we run a Runs test and compute the Hurst exponent. These methods are both particularly relevant in the analysis of financial series. Finally, by comparing the results of these different approaches, we identify which strategy generates most persistence.
Download or read book Hedge Funds written by Marco A. Navone and published by . This book was released on 2015 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the persistence of the ability of hedge fund managers. Using a database of 3627 hedge funds from 1994 to 2005 we demonstrate that the ability does not persist for top performers once the strategy of the fund is correctly assessed. Manager ability is defined as the difference between fund return and the return of a portfolio of hedge fund indices whose weights have been estimated with a tracking error minimization. Our results are different from other contributions that measure the ability on the base of the investment strategy self reported in the fund prospectus. We demonstrate that the results of these previous contributions may be biased by a quot;style biasquot; that we define as the difference between the prospectus strategy and the one that best fits fund returns.
Download or read book Does Hedge Fund Performance Persist Overview and New Empirical Evidence written by Martin Eling and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The contribution of this paper is to provide an overview and new empirical evidence on hedge fund performance persistence, which has been a controversial issue in the academic literature during the last several years. In the first step, we review recent studies and put them into a joint evaluation of hedge fund performance persistence. In the second step, the methodological framework developed in the overview is used to present new empirical evidence. We find different levels of performance persistence depending on the statistical methodology and the hedge fund strategy employed. In our study, performance persistence cannot be explained by the use of optionlike strategies, but it can be partially explained by survivorship and backfilling bias. Differences among hedge fund strategies might be explained by return smoothing. Finally, we develop a rationale for choosing between different methodologies to measure performance persistence and conclude that the multi-period Kolmogorov-Smirnov test is the most useful for evaluating performance persistence of hedge funds.
Download or read book Persistence in Hedge Fund Performance written by Harry M. Kat and published by . This book was released on 2002 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we study the persistence and predictability of several statistical parameters of individual hedge fund returns. We find little evidence of persistence in mean returns but do find strong persistence in hedge funds' standard deviations and their correlation with the stock market. Persistence in skewness and kurtosis is low but this could be due to the small size of the sample used. Despite the observed persistence, our study also shows that in absolute terms hedge funds' risk profiles are not easily predicted from historical returns alone. The true value of a hedge fund's track record therefore appears not to lie in its use as a predictor of future performance and risk, but primarily in the insight that it provides in a fund's risk profile relative to that of other funds in the same strategy group. The availability of a track record is important, but for a different reason than many investors think.
Download or read book Persistence of Hedge Fund Performance written by Nic Schaub and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Hedge Fund Performance and Persistence in Bull and Bear Markets written by Daniel P.J. Capocci and published by . This book was released on 2005 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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. Our 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. We apply an original ten-factor composite performance model that achieves very high significance levels. The analysis of performance indicates that most hedge funds significantly out-performed the market during the whole test period, mostly thanks to the bullish sub-period. In contrast, no significant under-performance 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 behavior.
Download or read book Perspectives written by William Fung and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tending to be static and single-database oriented, existing models for correcting performance measurement biases are unable to detect potential data errors arising from (1) hedge funds that migrate from one database vendor to another and (2) merged databases. In general, return measurement biases can be traced to two key events: when a hedge fund elects to enter one or more databases (backfill bias) and when a hedge fund exits a database (survivorship bias). Artificial rules (e.g., ignoring the first x number of months of performance history to minimize backfill bias) and survivorship statistics based on a single database vendor are susceptible to another form of bias as databases evolve and consolidate. The authors posit that one must be mindful of how much of the hedge fund industry one is observing before passing judgment on the performance statistics of the hedge fund industry as a whole.
Download or read book Performance Persistence of Hedge Funds written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate, for each hedge fund strategy, the likelihood of performance persistence in different market regimes. The analysis is conducted on funds in the Hedge Fund Research (HFR) database within short-horizons (up to one year) during the period from January 1994 to December 2012. We found the likelihood of persistence generally tends to increase in bearish market. For instance, at 12-month horizon the likelihood of persistence for GM and OTH funds is higher in bearish times than in bullish times. Although this is true from the statistical point of view, the simulated portfolio returns do not show a strong pattern of persistence in bearish market, thus decreases the value of use in reality. RV and MN funds, however, have the same level of persistence likelihood across market regimes, and the simulated returns show a strong sign of persistence among winner-winners and loser-losers in both market regimes. Hence, managers' skills are predictable and an active fund-selection process based on past performance could be undertaken for RV and MN funds.
Download or read book Hedge Fund Performance Persistence written by Nicole M. Boyson and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent literature has found some evidence of performance persistence in hedge funds. This study investigated whether this persistence varies with fund characteristics, such as size and age. Previous research has found that funds face capacity constraints, that investment flows chase past performance, and that as funds age, they become more passively managed, which reduces the likelihood of performance persistence as funds grow older and larger. Consistent with this model, this study found that performance persistence is strongest among small, young funds. A portfolio of these funds with prior good performance outperformed a portfolio of large, mature funds with prior poor performance by 9.6 percent per year.
Download or read book Performance Persistence of Event Driven Hedge Funds written by Constantin Claussen and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Event-Driven strategy is one of the most popular and fastest growing investment approaches within the hedge fund industry. Hedge fund investors often base their investment decisions on past returns because they expect this to be a good indicator of future performance. However, this is a controversial topic in the academic literature. For this reason, the aim of this study is to provide empirical evidence on Event-Driven hedge fund performance persistence. Therefore, this paper investigates the raw returns and two risk-adjusted performance measures in the period from 2008 to June 2015 for their level of performance persistence by applying both non-parametric and parametric two-period tests. The findings of this study suggest that there is persistence of up to 12 months in the performance of Event-Driven hedge funds. However, the results further indicate that investors should be cautious when making their investment decisions based on performance persistence. Levels of persistence fluctuate highly depending on the underlying performance measure or methodology, as well as time horizon and because the profitable exploitation of short-term persistence is strongly limited due to liquidity restrictions of hedge funds.
