Does the hedge fund industry deliver alpha?

Arbeitspapier

We measure the total-risk-adjusted (as opposed to factor-risk-adjusted) performance of hedge fund indices in well-diversified portfolios. Alpha is defined as the difference between, on the one hand, the average return on a mean-variance efficient portfolio containing exclusively traditional market assets (such as stocks and bonds) and, on the other hand, the average return on a mean-variance efficient portfolio containing traditional market assets and the new asset (such as a hedge fund index), where both portfolios carry the same risk. Alpha is conditioned on this risk level. Outlier-robust mean-variance efficient portfolios are constructed by using Minimum Volume Ellipsoid (MVE) estimates of location and scatter. We find that, between July 1995 and December 2005, the broad Credit Suisse/Tremont hedge index did not deliver statistically significant alpha.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economic and Financial Report ; No. 2006/02

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Asset Pricing; Trading Volume; Bond Interest Rates ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Wagenvoort, Rien
• Event: Veröffentlichung
• (who): European Investment Bank (EIB)
• (where): Luxembourg
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/45277
• Last update: 10.03.2025, 11:44 AM CET