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The Journal of Alternative Investments

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Primary Article

On Taking the “Alternative” Route

The Risks, Rewards, and Performance Persistence of Hedge Funds

Vikas Agarwal and Narayan Y. Naik
The Journal of Alternative Investments Spring 2000, 2 (4) 6-23; DOI: https://doi.org/10.3905/jai.2000.318973
Vikas Agarwal
Fauchier partner's scholar in the Ph.D. program (finance) at the London Business School, in London.
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Narayan Y. Naik
Associate professor of finance and the Citibank Research Fellow at the London Business School.
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Abstract

The risk–return characteristics, risk exposures, and performance persistence of various hedge fund strategies remains an area of interest to alternative asset investors. Using a database on hedge fund indices and individual hedge fund managers in a mean–variance framework, results show that a combination of alternative investments and passive indexing provides a significantly better risk–return tradeoff than passively investing in the different asset classes. Moreover, using parametric and non–parametric methods, a reasonable degree of persistence is found for hedge fund managers. This seems to be attributable more to the losers continuing to be losers instead of winners continuing to be winners and highlights the importance of manager selection in case of hedge funds.

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The Journal of Alternative Investments
Vol. 2, Issue 4
Spring 2000
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On Taking the “Alternative” Route
Vikas Agarwal, Narayan Y. Naik
The Journal of Alternative Investments Mar 2000, 2 (4) 6-23; DOI: 10.3905/jai.2000.318973

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On Taking the “Alternative” Route
Vikas Agarwal, Narayan Y. Naik
The Journal of Alternative Investments Mar 2000, 2 (4) 6-23; DOI: 10.3905/jai.2000.318973
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Cited By...

  • Allocating to Liquid Alternative Strategies for Mean-Variance Diversification
  • Evaluating the Efficiency of Hedge Fund Replication: * Return and Diversification Effects
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  • What Is the True Cost of Active Management? A Comparison * of Hedge Funds and Mutual Funds
  • Do "Hot Hands" Exist in Funds of Hedge Funds?
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  • Factor Modeling and Benchmarking of Hedge Funds
  • Currency Management Style through the Ages
  • Timber as an Institutional Investment
Show more Primary Article
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