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Finance and Financial Management

Research Collection BNP Paribas Hedge Fund Centre

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Predictability

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Full-Text Articles in Business

Hedge Funds, Managerial Skill, And Macroeconomic Variables, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo Mar 2011

Hedge Funds, Managerial Skill, And Macroeconomic Variables, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

Duplicate, see https://ink.library.smu.edu.sg/lkcsb_research/1867/. This paper evaluates hedge fund performance through portfolio strategies that incorporate predictability based on macroeconomic variables. Incorporating predictability substantially improves out-of-sample performance for the entire universe of hedge funds as well as for various investment styles. While we also allow for predictability in fund risk loadings and benchmark returns, the major source of investment profitability is predictability in managerial skills. In particular, long-only strategies that incorporate predictability in managerial skills outperform their Fung and Hsieh (2004) benchmarks by over 17 percent per year. The economic value of predictability obtains for different rebalancing horizons and alternative benchmark …


Investing In Hedge Funds When Returns Are Predictable, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo Feb 2007

Investing In Hedge Funds When Returns Are Predictable, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

This paper evaluates hedge fund performance through portfolio strategies that incorporate predictability in managerial skills, fund risk loadings, and benchmark returns. Incorporating predictability substantially improves performance for the entire universe of hedge funds as well as for various investment styles. The outperformance is strongest during market downturns when the marginal utility of consumption is relatively high. Moreover, the major source of investment profitability is predictability in managerial skills. In particular, long-only strategies that incorporate predictability in managerial skills outperform their Fung and Hsieh (2004) benchmarks by over 17 percent per year. The economic value of predictability obtains for different rebalancing …