Hedge Fund Return Predictability Under the Magnifying Glass
Year: 2013
Type: article
Abstract: This paper develops a unified approach to comprehensively analyze individual hedge fund return predictability, both in and out of sample. In sample, we find that variation in hedge fund performance across changing market conditions is widespread and economically significant. The predictability pattern is consistent with economic rationale, and largely reflects differences in key hedge fund characteristics, such as leverage or capacity constraints. Out of sample, we show that a simple strategy that combines the funds’ return forecasts obtained from individual predictors delivers superior performance. We exploit this simplicity to highlight the drivers of this performance, and find that in- and out-of-sample predictability are closely related.
Authors: Doron Avramov, Laurent Barras, Robert Kosowski
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123894779