SAIF Seminar Series (18)
Topic: SAIF Seminar Series (18)
Time: Friday , 2010-10-22 17:00-08:00
Speaker: Lu, Zheng
Affiliations: University of California
SAIF Seminar Series (18)
星期四,2010-10-22 15:30-17:00
Lu, Zheng

The Road Less Traveled: Strategy Distinctiveness and Hedge Fund Performance
Basic economic principle suggests that a well-known trading strategy offers little economic profit. In this paper, we investigate whether skilled hedge fund managers are more likely to pursue unique investment strategies that will result in superior performance. We propose a measure of the distinctiveness of a fund’s investment strategy based on historical fund return data. Specifically, we examine the extent to which a fund’s returns differ from those of its peer funds. We term the measure “Strategy Distinctiveness Index” (SDI). The higher the SDI, the more distinctive is a fund’s strategy. We document a substantial cross-sectional variation as well as a strong persistence over time in funds’ SDI. Our main result indicates that, on average, a higher SDI is associated with better subsequent performance. Funds in the highest SDI quintile significantly outperform funds in the lowest SDI quintile by about 4% in the subsequent year after adjusting for risk.
研究领域:equity markets, mutual funds, hedge funds, investor behavior and expectations, and institutional trading.