The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Do Hot Hands Exist among Hedge Fund Managers? An Empirical Evaluation
Published: 01/13/2010 | DOI: 10.1111/j.1540-6261.2009.01528.x
RAVI JAGANNATHAN, ALEXEY MALAKHOV, DMITRY NOVIKOV
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.