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Determinants of hedge fund performance during ‘good’ and ‘bad’ economic periods

Stafylas, Dimitrios; Andrikopoulos, Athanasios

Authors

Dimitrios Stafylas

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Dr Thanos Andrikopoulos A.Andrikopoulos@hull.ac.uk
Lecturer in Finance & Programme Director BSc Financial Management at University of Hull



Abstract

We analyse the drivers of hedge fund performance, focusing simultaneously on fund size, age, lockup period, fund strategies, business cycles and different market conditions, dealing with the omitted variable bias. We use exogenous break points and a switching Markov model to endogenously determine different market conditions. We find that HFs deliver positive alpha only during “good” times, irrespective of their fundamentals. During “bad” times, they minimise their systematic risk. Small and young funds, and those with redemption restrictions deliver higher alpha compared to their peers during “good” times. Finally, specific strategies deliver significantly negative alpha during “bad” times.

Journal Article Type Article
Publication Date 2020-04
Journal Research in International Business and Finance
Print ISSN 0275-5319
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 52
Article Number 101130
APA6 Citation Stafylas, D., & Andrikopoulos, A. (2020). Determinants of hedge fund performance during ‘good’ and ‘bad’ economic periods. Research in international business and finance, 52, https://doi.org/10.1016/j.ribaf.2019.101130
DOI https://doi.org/10.1016/j.ribaf.2019.101130
Keywords Business, Management and Accounting (miscellaneous); Finance; Hedge funds; Hedge funds characteristics; Hedge fund performance
Publisher URL https://www.sciencedirect.com/science/article/pii/S027553191930563X