Is it alpha or beta? Decomposing hedge fund returns when models are misspecified

• 成果类型: Article
• 署名作者: Ardia, David; Barras, Laurent; Gagliardini, Patrick; Scaillet, Olivier
• 署名单位: Universite de Montreal; HEC Montreal; Universite de Montreal; HEC Montreal; University of Luxembourg; Universita della Svizzera Italiana; University of Geneva; University of Geneva; University of Luxembourg
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103805
• 发表日期: 2024
• 关键词: Hedge fund returns; alpha; beta; Model Misspecification; Large cross-section

摘要

We develop a novel approach to separate alpha and beta under model misspecification. It comes with formal tests to identify less misspecified models and sharpen the return decomposition of individual funds. Our hedge fund analysis reveals that: (i) prominent models are as misspecified as the CAPM, (ii) several factors (time -series momentum, variance, carry) capture alternative strategies and lower performance in all investment categories, (iii) fund heterogeneity in alpha and beta is large-an important result for fund selection and models of active management, (iv) performance is increasingly similar to mutual funds, (v) fund valuation is sensitive to investor sophistication.