We examine the relationship between deviating from the benchmark and subsequent performance for hedge funds. We propose a simple new measure of benchmark deviations, termed the Dispersion Contribution Index (DCI), which is based on a fund's return-distance from the mean return of same-style...

There is still no consensus regarding a generally accepted factor model to assess risk-adjusted hedge fund performance. In this paper, we compare three alternative factor models: the widely used Fung and Hsieh (2004) seven-factor model, a recently proposed extension to an eight-factor model, and...

Despite the exponential increase in the literature related to the performance of Alternative Investment Funds (AIFs), risk management with respect to the measurement of performance persistence remains largely unexplored. In this paper, we investigate the impact of geolocation and investment...

For 5,500 North American hedge funds following 11 different strategies, we analyse the stand-alone performance of these strategies using a stochastic discount factor approach. Employing the same data, we then consider the diversification benefits of each hedge fund strategy when combined with a...

This paper studies hedge fund performance and confirms reports of an aggregate decline over the past decade. We test whether a comprehensive set of prediction models can select subsets of individual funds that buck the trend and subsequently outperform. Seven of the predictors reliably pick...

This paper provides evidence on the interaction between hedge funds' performance and their market liquidity risk and funding liquidity risk. We demonstrate that funding liquidity risk is an important determinant of hedge fund performance. Hedge funds with high loadings on the funding liquidity...

We reconsider the question of whether beta-centric hedge fund activity is predictive of superior performance. We construct a measure of overall beta activity of fund managers, Beta Activity, and find evidence that top beta active managers deliver superior long term out-of-sample performance...

This paper aims to analyze and develop systematic methods to construct funds of funds (FOF) products investing in Chinese hedge funds, with low risk, high return and high Sharpe Ratio, or other ideal characteristics required by investors. Using performance data of more than 600 hedge funds, we...

Consistent with the well-documented relation between political orientation and psychological traits, hedge funds' political orientations are related to their portfolio decisions. Relative to politically conservative hedge funds, politically liberal hedge funds exhibit a preference for smaller...

We survey articles on hedge funds' performance persistence and fundamental factors from the mid-1990s to the present. For performance persistence, we present some pioneering studies that contradict previous findings that hedge funds' performance is a short term matter. We discuss recent...