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Geographical focus in emerging markets and hedge fund performance

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  • Kotkatvuori-Örnberg, Juha
  • Nikkinen, Jussi
  • Peltomäki, Jarkko

Abstract

Emerging market hedge funds are an asset class which does not seem to outperform the market benchmarks. We hypothesize that the poor aggregate performance may be due to lack of focus of these funds. Our results suggest that a portfolio of emerging market hedge funds, which have geographical focuses, outperform their underlying stock markets. Hedge funds which focus on Eastern Europe appear to have the best outperformance. However, we also find that the performance of all emerging market hedge funds has reduced after the start of the 2008 Crisis.

Suggested Citation

  • Kotkatvuori-Örnberg, Juha & Nikkinen, Jussi & Peltomäki, Jarkko, 2011. "Geographical focus in emerging markets and hedge fund performance," Emerging Markets Review, Elsevier, vol. 12(4), pages 309-320.
    • Handle: RePEc:eee:ememar:v:12:y:2011:i:4:p:309-320
    DOI: 10.1016/j.ememar.2011.05.001
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    References listed on IDEAS

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    1. Borensztein, Eduardo R. & Gelos, R. Gaston, 2003. "Leaders and followers: emerging market fund behavior during tranquil and turbulent times," Emerging Markets Review, Elsevier, vol. 4(1), pages 25-38, March.
    2. Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2005. "On the Industry Concentration of Actively Managed Equity Mutual Funds," Journal of Finance, American Finance Association, vol. 60(4), pages 1983-2011, August.
    3. Aragon, George O., 2007. "Share restrictions and asset pricing: Evidence from the hedge fund industry," Journal of Financial Economics, Elsevier, vol. 83(1), pages 33-58, January.
    4. Naranjo, Andy & Porter, Burt, 2007. "Including emerging markets in international momentum investment strategies," Emerging Markets Review, Elsevier, vol. 8(2), pages 147-166, May.
    5. Kosowski, Robert & Naik, Narayan Y. & Teo, Melvyn, 2007. "Do hedge funds deliver alpha? A Bayesian and bootstrap analysis," Journal of Financial Economics, Elsevier, vol. 84(1), pages 229-264, April.
    6. Huij, Joop & Post, Thierry, 2011. "On the performance of emerging market equity mutual funds," Emerging Markets Review, Elsevier, vol. 12(3), pages 238-249, September.
    7. David Blitz & Laurens Swinkels, 2008. "Fundamental indexation: An active value strategy in disguise," Journal of Asset Management, Palgrave Macmillan, vol. 9(4), pages 264-269, October.
    8. Melvyn Teo, 2009. "The Geography of Hedge Funds," The Review of Financial Studies, Society for Financial Studies, vol. 22(9), pages 3531-3561, September.
    9. Abugri, Benjamin A. & Dutta, Sandip, 2009. "Emerging market hedge funds: Do they perform like regular hedge funds?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 834-849, December.
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    Cited by:

    1. Basu, Anup K. & Huang-Jones, Jason, 2015. "The performance of diversified emerging market equity funds," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 116-131.
    2. Aiken, Adam L. & Kilic, Osman & Reid, Sean, 2016. "Can hedge funds time global equity markets? Evidence from emerging markets," Review of Financial Economics, Elsevier, vol. 29(C), pages 2-11.
    3. Yang, Fan & Havranek, Tomas & Irsova, Zuzana & Novak, Jiri, 2024. "Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance," EconStor Preprints 289497, ZBW - Leibniz Information Centre for Economics.
    4. Ali, Sara & Badshah, Ihsan & Demirer, Riza, 2022. "Value-at-risk and the cross section of emerging market hedge fund returns," Global Finance Journal, Elsevier, vol. 52(C).
    5. Bernardo, Márcio R. & Campani, Carlos Heitor, 2019. "Liability driven investment with alternative assets: Evidence from Brazil," Emerging Markets Review, Elsevier, vol. 41(C).
    6. Park, Hyuna, 2015. "Emerging market hedge funds in the United States," Emerging Markets Review, Elsevier, vol. 22(C), pages 25-42.
    7. Adam L. Aiken & Osman Kilic & Sean Reid, 2016. "Can hedge funds time global equity markets? Evidence from emerging markets," Review of Financial Economics, John Wiley & Sons, vol. 29(1), pages 2-11, April.
    8. Božović, Miloš, 2022. "Recent evidence on the short-term and long-term performance persistence of emerging-market mutual fund returns," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).

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    More about this item

    Keywords

    Hedge fund; Emerging market; Abnormal performance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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