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Predicting hedge fund performance when fund returns are skewed
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Accepted Version
Date
2019-11-19
Authors
Heuson, Andrea J.
Hutchinson, Mark C.
Kumar, Alok
Journal Title
Journal ISSN
Volume Title
Publisher
John Wiley & Sons, Inc.
Published Version
Abstract
We show that fund-specific return skewness is associated with managerial skill and future hedge fund performance. Specifically, skewness in fund returns reflects managerial skill in avoiding large drawdowns. Using a new measure of investment skill that accounts for this managerial ability, we demonstrate that traditional performance measures under-estimate (over-estimate) managerial performance when returns exhibit positive (negative) fund-specific skewness. Our new measure is particularly valuable during periods of economic crisis, when the annual risk-adjusted out-performance is 5.5%.
Description
Keywords
Performance measurement , Hedge funds , Performance persistence , Investment skill , G10 , G19 , G20 , Fund-specific skewness
Citation
Heuson, A. J., Hutchinson, M. C. and Kumar, A. (2019) 'Predicting hedge fund performance when fund returns are skewed', Financial Management. doi: 10.1111/fima.12304
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Copyright
© 2019, John Wiley & Sons Inc. This is the peer reviewed version of the following article: Heuson, A. J., Hutchinson, M. C. and Kumar, A. (2019) 'Predicting hedge fund performance when fund returns are skewed', Financial Management, doi: 10.1111/fima.12304, which has been published in final form at https://doi.org/10.1111/fima.12304. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.