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Evaluating the performance of hedge funds using two-stage peer group benchmarks


Wilkens, M and Yao, J and Oehler, PJ and Jeyasreedharan, N, Evaluating the performance of hedge funds using two-stage peer group benchmarks, Journal of Asset Management, 16, (4) pp. 272-291. ISSN 1470-8272 (2015) [Refereed Article]

Copyright Statement

Copyright 2015 Macmillan Publishers Ltd.

DOI: doi:10.1057/jam.2015.3


© 2015 Macmillan Publishers Ltd. This article proposes a two-stage peer group benchmarking approach to evaluate the performance of hedge funds. We present different ways of orthogonalizing the peer group benchmarks and discuss their general properties. We then orthogonalize the relevant benchmarks against predetermined exogenous factors. For a broad dataset we show that this approach captures much more commonalities in hedge funds returns when compared with the standard methodology of using exogenous factors only. As a consequence, the empirical rankings of hedge funds, on the basis of alphas, change considerably. Therefore, the proposed two-stage peer group benchmark allows us to identify which hedge fund managers outperformed their cohorts.

Item Details

Item Type:Refereed Article
Research Division:Commerce, Management, Tourism and Services
Research Group:Banking, finance and investment
Research Field:Investment and risk management
Objective Division:Economic Framework
Objective Group:Other economic framework
Objective Field:Other economic framework not elsewhere classified
UTAS Author:Jeyasreedharan, N (Dr Nagaratnam Jeyasreedharan)
ID Code:102039
Year Published:2015
Deposited By:TSBE
Deposited On:2015-07-23
Last Modified:2016-08-16

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