scholarly journals Only Winners in Tough Times Repeat: Hedge Fund Performance Persistence over Different Market Conditions

2016 ◽  
Vol 2016 (30) ◽  
pp. 1-40 ◽  
Author(s):  
Zheng Sun ◽  
◽  
Ashley W. Wang ◽  
Lu Zheng
Keyword(s):  
Hedge Fund ◽  
Fund Performance ◽  
Performance Persistence ◽  
Market Conditions ◽  
Hedge Fund Performance

scholarly journals Market Conditions and Fund Flows: Evidence from Hedge Funds

2013 ◽  
Author(s):  
Wen-Hsiu Chou ◽  
Dongmin Ke ◽  
Danielle Xu
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Fund Performance ◽  
Performance Persistence ◽  
Fund Flows ◽  
Investment Strategies ◽  
Market Conditions ◽  
Smart Money ◽  
Investor Behaviour ◽  
Hedge Fund Performance

This paper investigates whether market conditions affect fund investor behaviour in the hedge fund industry, especially the volatility in the up and down markets. Using a sample of 5,254 individual hedge funds from January 1994 to December 2009, we find that hedge fund investors tend to invest less during up and down-volatile markets. They also adopt different investment strategies in these two market conditions. When market is calm and relatively predictable, there is almost no difference in their behaviors between up and down markets. We also find that smart money effect exists over both 3- and 12-month periods under all market conditions except volatile markets. A further investigation suggests that the observed smart money effect is largely driven by hedge fund performance persistence, which is present and significant is quiet markets only. The findings are relevant to portfolio theories concerning investor recognition of upside and downside volatilities.  

scholarly journals Only Winners in Tough Times Repeat: Hedge Fund Performance Persistence over Different Market Conditions

2018 ◽  
Vol 53 (5) ◽  
pp. 2199-2225 ◽  
Author(s):  
Zheng Sun ◽  
Ashley W. Wang ◽  
Lu Zheng
Keyword(s):  
Performance Measures ◽  
Hedge Fund ◽  
Fund Performance ◽  
Performance Persistence ◽  
Market Conditions ◽  
Share Restrictions ◽  
Hedge Fund Performance ◽  
Sector Returns

We provide novel evidence that hedge fund performance is persistent following weak hedge fund markets but is not persistent following strong markets. Specifically, we construct two performance measures, RET_DOWN and RET_UP, conditioned on the level of overall hedge fund sector returns. After adjusting for risks, funds in the highest RET_DOWN quintile outperform funds in the lowest quintile by approximately 7% in the subsequent year, whereas funds with better RET_UP do not outperform subsequently. The RET_DOWN measure can predict future fund performance over a horizon as long as 3 years, for both winners and losers and for funds with few share restrictions.

Hedge Fund Performance Persistence and Mixed Trading Strategies

2016 ◽  
Author(s):  
Dimitrios Stafylas ◽  
Keith P. Anderson ◽  
Muhammad Moshfique Uddin
Keyword(s):  
Hedge Fund ◽  
Fund Performance ◽  
Trading Strategies ◽  
Performance Persistence ◽  
Hedge Fund Performance

scholarly journals The Effect of Investment Constraints on Hedge Fund Investor Returns

2018 ◽  
Vol 54 (4) ◽  
pp. 1539-1571 ◽  
Author(s):  
Juha Joenväärä ◽  
Robert Kosowski ◽  
Pekka Tolonen
Keyword(s):  
Real World ◽  
Hedge Funds ◽  
Liquidity Constraints ◽  
Hedge Fund ◽  
Fund Performance ◽  
Performance Persistence ◽  
Investor Returns ◽  
Fund Size ◽  
Hedge Fund Performance ◽  
Investment Constraints

This paper examines the effect of real-world, investor-level investment constraints, including several that have not been studied before, on hedge fund performance and its persistence. Using a large consolidated database, we demonstrate that hedge fund performance persistence is significantly reduced when rebalancing rules reflect fund size restrictions and liquidity constraints but remains statistically significant at higher rebalancing frequencies. Hypothetical investor portfolios that incorporate additional minimum diversification constraints, minimum investment requirements, and focus on open funds suggest that the performance and its persistence documented in earlier studies of hedge funds is not easily exploitable, especially by large investors.

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