- Oulun yliopisto
- Tampereen yliopisto / Yksiköt
- Lapin yliopisto / University of Lapland
- Lapland University Press / Lapin yliopistokustannus
- Itä-Suomen yliopisto
- Centria-ammattikorkeakoulu, Centria-kirjasto Kokkola
- Vaasan yliopisto
- Tampere University Press. TUP
- Viipurin Suomalainen Kirjallisuusseura
- Humanistinen ammattikorkeakoulu- Humak
- Tampereen teknillisen yliopiston julkaisut
THREE ESSAYS ON HEDGE FUND PERFORMANCE, ACTA UNIVERSITATIS OULUENSIS G Oeconomic a 67This doctoral thesis aims to contribute to the literature on hedge fund performance in three\ninterrelated essays. The first essay uses a novel database aggregation and a comprehensive\nanalysis of differences between the main commercial databases exploring the effects of different\ndatabases on previously documented stylized facts, including the (1) average risk-adjusted\nperformance; (2) the persistence of that performance; (3) and the cross-sectional relation between\nfund-characteristics and risk-adjusted returns. The main finding is that several previously\ndocumented stylized facts about hedge fund performance are sensitive to database selection and\nassociated biases. Differences in conclusions stem from database differences in defunct coverage,\nsurvivorship and backfill biases, and the completeness of assets under management information.\nThe second essay examines the effect of frictions on the returns that investors can earn from\ninvesting in hedge funds. The study focuses on size and redemption restrictions that are key\ninvestment constraints in practice. The size–performance relationship is positive (negative) when\npast (future) performance is used. The negative size–performance relationship is consistent with\ntheories suggesting a decreasing returns-to-scale in the active management industry. Differences\nin attrition rates and risk taking as well as the relative importance of management fees and capacity\nconstraints between small and large funds are consistent with an equilibrium in which investors\nand hedge funds optimally respond to incentives subject to constraints. Performance persistence\ndecreases along with the fund size but concentrated hypothetical Fund-of-Fund portfolios\noutperform.\nThe third essay examines hedge funds' ability to enhance their performance through leverage.\nThe essay explicitly shows that leverage enhances risk-adjusted performance and risk of\ninvestment programs. The main finding is that the average high-leverage fund class underperforms\nits low-leverage counterpart of the same investment program after their returns are appropriately\nadjusted to the same level. The finding is consistent with the predictions of leverage aversion\ntheories suggesting that leverage constraints and costs of leverage have a negative impact on riskadjusted\nreturns.
- 272 s.
- TOLONEN PEKKA