The Road Less Traveled: Strategy Distinctiveness and Hedge Fund Performance
We investigate whether skilled hedge fund managers are more likely to pursue unique investment strategies that result in superior performance. We propose a measure of the distinctiveness of a fund's investment strategy based on historical fund return data. We call the measure the "Strategy Distinctiveness Index" (SDI). We document substantial cross-sectional variations as well as strong persistence in SDI. Our main result indicates that, on average, a higher SDI is associated with better subsequent performance. After adjusting for risk, funds in the highest SDI quintile outperform funds in the lowest quintile by 3.5% in the subsequent year. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.
Year of publication: |
2012
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Authors: | Sun, Zheng ; Wang, Ashley ; Zheng, Lu |
Published in: |
Review of Financial Studies. - Society for Financial Studies - SFS. - Vol. 25.2012, 1, p. 96-143
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Publisher: |
Society for Financial Studies - SFS |
Saved in:
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