How Surviving Hedge Funds Beat the Market

13 Pages Posted: 12 Mar 2008

See all articles by Craig W. French

Craig W. French

Portfolio Engineering Laboratory

Damian B. Ko

Corbin Capital Partners, L.P.

Date Written: November 28, 2006

Abstract

This presentation is the slideshow Craig French used to illustrate his comments when he presented the paper "How Hedge Funds Beat the Market" to the Quantitative Working Alliance For Applied Financial Education and Wisdom ("QWAFAFEW") in New York, November 2006. The paper, coauthored with Damian Ko, investigates the determinants of hedge fund portfolio performance - whether hedge funds exhibit security selection skill and market-timing skill. We examine a sample of 157 long-short equity hedge funds over the 10-year period from January, 1996 through December, 2005. To account for nonlinearities we employ the Treynor and Mazuy (1966) quadratic model. To account for illiquidity we incorporate the Scholes and Williams (1977) nonsynchronous data model. Before and after adjusting for illiquidity, we find strong evidence of security selection skill and limited evidence of market-timing skill.

Keywords: Hedge Funds, Performance Attribution, Treynor, CAPM

JEL Classification: G20

Suggested Citation

French, Craig W. and Ko, Damian Bongjoon, How Surviving Hedge Funds Beat the Market (November 28, 2006). Available at SSRN: https://ssrn.com/abstract=1105070 or http://dx.doi.org/10.2139/ssrn.1105070

Craig W. French (Contact Author)

Portfolio Engineering Laboratory ( email )

New Hope, PA 18977
United States
2679827565 (Phone)
18938 (Fax)

Damian Bongjoon Ko

Corbin Capital Partners, L.P. ( email )

9 West 57th Street
25th Floor
New York, NY 10019
United States
212-634-7354 (Phone)
212-634-7399 (Fax)