The Impact of Non-Normality Risks and Tactical Trading on Hedge Fund Alphas

Most previous tests of hedge fund performance have failed to model the exposure of hedge fund returns to systematic non-normality risks, nor have they taken the tactical asset allocation decisions of hedge funds managers into account.

Author(s) :

Harry M. Kat

Professor of Risk Management, Sir John Cass Business School, City University (UK)

Joelle Miffre

Associate Professor of Finance, EDHEC Business School

Presentation :

This paper shows that failure to account for these features leads to incorrect statistical inferences on the performance of 1 out of 4 hedge funds and overstates hedge funds' alpha by 1.54% on average. Put another way, hedge funds offer abnormal returns that are 23.1% lower than commonly accepted.
The Impact of Non-Normality Risks and Tactical Trading on Hedge Fund Alphas...
(-1.00 B)
Type : Working paper
Date : le 08/05/2006
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la Recherche de l'EDHEC [] Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

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