Review of Financial Studies (forthcoming)
William Fung
Principal, Paradigm, LDC
George Town, Cayman Islands
David A. Hsieh
Fuqua School of Business, Duke
University, Durham, NC 27708
Abstract
This paper presents some new results on an unexplored data set on hedge fund performance. The results indicate that hedge funds follow strategies that are dramatically different from mutual funds, and support the claim that these strategies are highly dynamic. The paper finds five dominant investment styles in hedge funds, which, when added to Sharpe's (1992) asset class factor model, can provide an integrated framework for style analysis of both buy-and-hold and dynamic trading strategies.