Abstract
We show that fund-specific return skewness is associated with managerial skill and future hedge fund performance. Specifically, skewness in fund returns reflects managerial skill in avoiding large drawdowns. Using a new measure of investment skill that accounts for this managerial ability, we demonstrate that traditional performance measures underestimate (overestimate) managerial performance when returns exhibit positive (negative) fund-specific skewness. Our new measure is particularly valuable during periods of economic crisis, when the annual risk-adjusted outperformance is 5.5%.
Original language | English (US) |
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Pages (from-to) | 877-896 |
Number of pages | 20 |
Journal | Financial Management |
Volume | 49 |
Issue number | 4 |
DOIs | |
State | Published - Dec 1 2020 |
Keywords
- G10
- G19
- G20
- fund-specific skewness
- hedge funds
- investment skill
- performance measurement
- performance persistence
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics