Hedge Fund Performance: Are Stylized Facts Sensitive to Which Database One Uses

Juha Joenväärä, Mikko Kauppila, Robert Kosowski, Pekka Tolonen

Research output: Contribution to journalArticleScientificpeer-review

3 Citations (Scopus)

Abstract

This paper proposes a novel database merging approach and re-examines the fundamental questions regarding hedge fund performance. Before drawing conclusions about fund performance, we form an aggregate database by exploiting all available information across and within seven commercial databases so that the widest possible data coverage is obtained and the effect of data biases is mitigated. Average performance is significantly lower but more persistent when these conclusions are inferred from the aggregate database than from some of the individual commercial databases. Although hedge funds deliver performance persistence, the average fund does not deliver significant risk-adjusted net-of-fee returns while the gross-of-fee returns remain significantly positive. Consistent with previous literature, we find a significant association between fund characteristics related to share restrictions as well as compensation structure and risk-adjusted returns.
Original languageEnglish
Pages (from-to)271-327
Number of pages57
JournalCritical Finance Review
Volume10
Issue number2
DOIs
Publication statusPublished - 24 Jun 2021
MoE publication typeA1 Journal article-refereed

Keywords

  • Hedge fund performance
  • Persistence
  • Sample selection bias
  • Managerial skill

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