An Excursion Into the Performance Characterstics of Hedge Funds
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In this paper the authors provide an overview of the most important properties of individual hedge fund returns. The net-of-fees monthly returns of the average individual hedge fund exhibit significant skewness, excess kurtosis, as well as positive first-order serial correlation.
Authors: Harry M. Kat, Ph.D., Sa Lu
In this paper the authors provide an overview of the most important properties of individual hedge fund returns. The net-of-fees monthly returns of the average individual hedge fund exhibit significant skewness, excess kurtosis, as well as positive first-order serial correlation. The correlations between hedge funds in the same strategy group are of a similar order of magnitude as the correlations between funds in different strategy groups and relatively low. Only 10 - 20% of the variation in the average individual hedge fund return can be explained by what happens in the U.S. equity and bond markets.
