Critical Finance Review > Vol 10 > Issue 2

Hedge Fund Performance: Are Stylized Facts Sensitive to Which Database One Uses?

Juha Joenväärä, Department of Finance, School of Business, Aalto University, Finland, juha.joenvaara@aalto.fi , Mikko Kauppila, University of Oulu, Finland, mikko.kauppila@oulu.fi , Robert Kosowski, Imperial College Business School, Oxford-Man Institute of Quantitative Finance and Unigestion, UK, r.kosowski@imperial.ac.uk , Pekka Tolonen, University of Oulu, Finland, pekka.tolonen@oulu.fi
 
Suggested Citation
Juha Joenväärä, Mikko Kauppila, Robert Kosowski and Pekka Tolonen (2021), "Hedge Fund Performance: Are Stylized Facts Sensitive to Which Database One Uses?", Critical Finance Review: Vol. 10: No. 2, pp 271-327. http://dx.doi.org/10.1561/104.00000104

Publication Date: 24 Jun 2021
© 2021 Juha Joenväärä, Mikko Kauppila, Robert Kosowski and Pekka Tolonen
 
Subjects
 
Keywords
G11G12G23
Hedge fund performancePersistenceSample selection biasManagerial skill
 

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In this article:
1. Introduction 
2. Institutional Development of Hedge Fund Databases 
3. Data 
4. Average Performance of Hedge Fund Databases 
5. Performance Persistence 
6. Concluding Remarks 
Appendix 
References 

Abstract

This paper proposes a novel database merging approach and re-examines the fundamental questions regarding hedge fund performance. Before drawing conclusions about fund performance, we form an aggregate database by exploiting all available information across and within seven commercial databases so that the widest possible data coverage is obtained and the effect of data biases is mitigated. Average performance is significantly lower but more persistent when these conclusions are inferred from the aggregate database than from some of the individual commercial databases. Although hedge funds deliver performance persistence, the average fund does not deliver significant risk-adjusted net-of-fee returns while the gross-of-fee returns remain significantly positive. Consistent with previous literature, we find a significant association between fund characteristics related to share restrictions as well as compensation structure and risk-adjusted returns.

DOI:10.1561/104.00000104

Online Appendix | 104.00000104_app.pdf

This is the article’s accompanying appendix.

DOI: 10.1561/104.00000104_app