An Analysis of Hedge Fund Performance 1984-2000

Using one of the largest hedge fund databases ever used (2,796 individual funds including 801 dissolved), we investigate hedge funds performance using various asset pricing models, including an extension of Carhart’s (1997) specification combined with the Fama and French (1998) and Agarwal and Naik (2000) models and a new factor that takes into account the fact that some hedge funds invest in emerging bond markets. This addition is particularly suitable for Event Driven, Global Macro, US Opportunistics, Equity non-Hedge and Sector funds. The performance of hedge funds for several individual strategies and different subperiods, including the Asian Crisis period, indicates evidence of persistence in performance in some cases but it is not stable over time.