Hedge fund return specification with errors-in-variables

Coën, Alain; Hübner, Georges; Desfleurs, Aurélie

doi:10.1057/jdhf.2009.19

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Article (Scientific journals)

Hedge fund return specification with errors-in-variables

Coën, Alain; Hübner, Georges; Desfleurs, Aurélie

2010 • In Journal of Derivatives and Hedge Funds, 16 (1), p. 22-52

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https://hdl.handle.net/2268/61304

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10.1057/jdhf.2009.19

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Keywords :

errors-in-variables; measurement errors; hedge fund performance

Abstract :

[en] In linear models for hedge fund returns, errors-in-variables may significantly alter the measurement of factor loadings and the estimation of abnormal performance. The higher moment estimator (HME) introduced by Dagenais and Dagenais (1997) effectively deals with these issues. Results on individual funds show that the HME specification does not uncover systematic performance biases, but can modify estimated alphas in most cases and identifies relative persistence for directional funds in bearish market conditions. Overall, the risk premia calculated with HME remain relatively stable when compared to ordinary least squares specifications.

Disciplines :

Finance

Author, co-author :

Coën, Alain; Université du Québec à Montréal > Graduate School of Business

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

Desfleurs, Aurélie; Université du Québec en Outaouais - UQO > Department of Accounting

Language :

English

Title :

Hedge fund return specification with errors-in-variables

Publication date :

2010

Journal title :

Journal of Derivatives and Hedge Funds

ISSN :

1753-9641

eISSN :

1753-965X

Publisher :

Palgrave Macmillan

Volume :

Issue :

Pages :

22-52

Peer reviewed :

Peer Reviewed verified by ORBi

Available on ORBi :

since 09 June 2010

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Bibliography

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