Muteba Mwamba, John Weirstrass
(2017)
An Empirical Evaluation Of Hedge Fund Managerial
Skills Using Bayesian Techniques.
Asian Academy of Management Journal of Accounting and Finance, 13 (1).
pp. 1-20.
ISSN 1823-4992
Abstract
This paper makes use of the Bayesian method to evaluate hedge fund managers’ selectivity,
market timing and outperformance skills separately, and investigates their persistence
from January 1995 to June 20101. We divide this sample period into four overlapping
sub-sample periods that contain different economic cycles. We defne a skilled manager
as a manager who can outperform the market in two consecutive sub-sample periods. We
employ Bayesian linear CAPM and Bayesian quadratic CAPM to generate skill coeffcients
during each sub-sample period. We found that fund managers who possess selectivity skills
can outperform the market at 7.5% signifcant level if and only if the economic conditions
that governed the fnancial market during the period between sub-sample period2 and subsample period3 remain the same.
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