Year of Graduation
Hedge-Funds Efficiency Models
Hedge funds today are among the most active institutions in the modern financial system and experience consistent growth in their number and assets under management. For investors the main criteria for choosing a hedge fund to invest in is its profitability. That is why understanding hedge funds’ return factors is important. This paper studies the possibility of application of extended asset-pricing models for hedge funds exposure and efficiency analysis. We say a hedge fund is efficient if its Alpha is above sample average and R-squared for asset pricing models is low. The research includes the usage of multifactor models for the return analysis of over 3600 funds during years 2005-2015. The contribution of this paper is comparative analysis of different hedge fund strategies, which allows to track whether a particular strategy beats the market or not. We track the relationship between hedge funds’ returns and exposure to commonly applied models between different strategies, regions and time.