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

Dimitrios Stafylas*, Athanasios Andrikopoulos

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Article number101130
JournalResearch in International Business and Finance
Volume52
Early online date28 Nov 2019
DOIs
Publication statusPublished - Apr 2020

Bibliographical note

Funding Information:
We wish to thank the participants of the BAFA 2017 Conference for their valuable comments. We also wish to thank Prof. Mike Tsionas, Prof. Mahbub Zaman, Dr. Keith Anderson, Dr. Mark Rhodes, Dr. Moshfique Uddin and Dr. Harry Venables for their valuable comments. The usual disclaimer applies. We acknowledge financial support to purchase the database used in this project from the York Management School, UK .

Publisher Copyright:
© 2019 Elsevier B.V.

Keywords

  • Hedge fund performance
  • Hedge funds
  • Hedge funds characteristics

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