Picture map of Europe with pins indicating European capital cities

Open Access research with a European policy impact...

The Strathprints institutional repository is a digital archive of University of Strathclyde's Open Access research outputs. Strathprints provides access to thousands of Open Access research papers by Strathclyde researchers, including by researchers from the European Policies Research Centre (EPRC).

EPRC is a leading institute in Europe for comparative research on public policy, with a particular focus on regional development policies. Spanning 30 European countries, EPRC research programmes have a strong emphasis on applied research and knowledge exchange, including the provision of policy advice to EU institutions and national and sub-national government authorities throughout Europe.

Explore research outputs by the European Policies Research Centre...

Assessing the impact of heteroskedasticity for evaluating hedge fund performance

Marshall, Andrew and Tang, Leilei (2011) Assessing the impact of heteroskedasticity for evaluating hedge fund performance. International Review of Financial Analysis, 20 (1). pp. 12-19. ISSN 1057-5219

Full text not available in this repository. Request a copy from the Strathclyde author

Abstract

Recently there have been a number of differing findings in the empirical evidence on fund performance. In this paper we suggest this difference could be explained by the treatment of the regression assumptions. The crucial question in this paper for investors is whether the presence of heteroskedasticity causes size distortion in testing fund performance. Our simulation findings indicate that heteroskedasticity can have significant impact on the evaluation of fund performance. We also apply a wild bootstrap approach to test a sample of hedge fund data. Our results suggest that one of the possible reasons for superior performance of hedge funds is that the bootstrap data generating process cannot fully account for heteroskedasticity. Overall, our results are consistent with the view that hedge funds are a heteroskedastic group and wild bootstrap is well suited to the performance measurement of hedge funds.