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Detecting performance persistence of hedge funds

Author

Listed:
  • Rania Hentati

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Philippe de Peretti

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we use nonparametric runs-based tests to analyze the randomness and the persistence of relative returns of hedge funds. Runs tests are implemented on a universe of hedge funds extracted from HFR database over the period spanning January 2000 to December 2012. Our findings suggest that i) slightly less than 80% of the studied universe has returns at random, ii) a similar figure is found out when focusing on relative returns, iii) hedge funds that do present clustering in their relative returns are mainly found within Event Driven and Relative Value strategies, iv) and for relative returns, results vary with the type of the benchmark nature (peer group average or traditional). This paper also emphasizes that runs tests may be a useful tool for investors in their fund's selection process.

Suggested Citation

  • Rania Hentati & Philippe de Peretti, 2015. "Detecting performance persistence of hedge funds," Post-Print hal-03045892, HAL.
    • Handle: RePEc:hal:journl:hal-03045892
    DOI: 10.1016/j.econmod.2015.02.029
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    Cited by:

    1. Cumming, Douglas & Monteiro, Pedro, 2022. "Hedge fund sales fees and the flow of funds around the world," Economic Modelling, Elsevier, vol. 112(C).

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