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Style consistency of hedge fund indexes across providers

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  • Peter Kugler
  • Jacqueline Henn-Overbeck
  • Heinz Zimmermann

Abstract

This article investigates the consistency of style returns of hedge funds across eight providers of style indexes. We select 10 style categories which are defined in a relatively consistent way across the various providers, so that the natural null hypothesis is that the returns should behave very similarly. We compare the results of a principal component analysis with tests of the hypothesis that unconditional mean returns and first order autocorrelation coefficients of returns are equal across the different providers for the same style. Our findings reveal a substantial degree of heterogeneity of index returns within the same style and cast serious doubts on their usefulness as benchmarks in the asset management industry.

Suggested Citation

  • Peter Kugler & Jacqueline Henn-Overbeck & Heinz Zimmermann, 2010. "Style consistency of hedge fund indexes across providers," Applied Financial Economics, Taylor & Francis Journals, vol. 20(5), pages 355-369.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:5:p:355-369
    DOI: 10.1080/09603100903459790
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    Cited by:

    1. Sujit Subhash & David Enke, 2019. "Hedge fund replication using strategy specific factors," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-19, December.

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