Do hot hands exist among hedge fund managers? An empirical evaluation

Ravi Jagannathan*, Alexey Malakhov, Dmitry Novikov

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

146 Scopus citations

Abstract

In measuring performance persistence, we use hedge fund style benchmarks. This allows us to identify managers with valuable skills, and also to control for option-like features inherent in returns from hedge fund strategies. We take into account the possibility that reported asset values may be based on stale prices. We develop a statistical model that relates a hedge fund's performance to its decision to liquidate or close in order to infer the performance of a hedge fund that left the database. Although we find significant performance persistence among superior funds, we find little evidence of persistence among inferior funds.

Original languageEnglish (US)
Pages (from-to)217-255
Number of pages39
JournalJournal of Finance
Volume65
Issue number1
DOIs
StatePublished - Feb 2010

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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