Risk and performance estimation in hedge funds revisited: Evidence from errors in variables

[en] This paper revisits the performance of hedge funds in the presence of errors in variables. To reduce the bias induced by measurement error, we introduce an estimator based on cross sample moments of orders three and four. This Higher Moment Estimation (HME) technique has significant consequences on the measure of factor loadings and the estimation of abnormal performance. Large changes in alphas can be attributed to measurement errors at the level of explanatory variables, while we emphasize some shifts in the economic contents of the equity risk premiums by switching from OLS to HME.

Disciplines :

Finance

Author, co-author :

Coën, Alain

Hübner, Georges ; Université de Liège - ULiège > HEC-Ecole de gestion : UER > Gestion financière

Language :

English

Title :

Risk and performance estimation in hedge funds revisited: Evidence from errors in variables

Publication date :

January 2009

Journal title :

Journal of Empirical Finance

ISSN :

0927-5398

Publisher :

Elsevier Science

Volume :

Issue :

Pages :

112-125

Peer reviewed :

Peer Reviewed verified by ORBi

Available on ORBi :

since 08 January 2010

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