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Can Hedge Funds Time the Market?

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  • Michael W. Brandt
  • Federico Nucera
  • Giorgio Valente

Abstract

We answer the somewhat narrower question of whether hedge funds adjust their conditional market exposure in response to real‐time changes in macroeconomic conditions, and whether doing so improves their performance. We find that hedge funds differ substantially in their responsiveness to macroeconomic data. The most procyclical market timers outperform their less active and counter‐cyclical peers by over 4% annualized with a risk adjusted alpha of 5.5%.

Suggested Citation

  • Michael W. Brandt & Federico Nucera & Giorgio Valente, 2019. "Can Hedge Funds Time the Market?," International Review of Finance, International Review of Finance Ltd., vol. 19(2), pages 459-469, June.
    • Handle: RePEc:bla:irvfin:v:19:y:2019:i:2:p:459-469
    DOI: 10.1111/irfi.12171
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    Cited by:

    1. Nick Taylor, 2023. "The Determinants of Volatility Timing Performance," Journal of Financial Econometrics, Oxford University Press, vol. 21(4), pages 1228-1257.

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