Relative importance of hedge fund characteristics |
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Authors: | Cécile Le Moigne Patrick Savaria |
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Affiliation: | 1. Caisse de dép?t et placement du Québec, Investment Policy Research, 1000 Place Jean-Paul-Riopelle, Montréal, Qc, H2Z 2B3, Canada
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Abstract: | This study compares the relative importance of thirteen attributes in explaining the cross-sectional variations in the returns of hedge funds, using a large sample from the TASS database covering the 1989–2005 period. We use a simple characteristic-based model of return decomposition, which has never before been applied to hedge funds. The characteristic factors are estimated using cross-sectional dummy-variable regressions. Their importance is found to be time-varying. We find that diversification across styles matters, but that it could be improved significantly by also diversifying across other characteristics, mainly including performance, volatility and fee structure. |
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Keywords: | Hedge funds characteristics performance |
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