Study is first to look under the hood to study hedge fund “skill”
Feb 28th, 2007 | Filed under: CAPM / Alpha TheoryHow Smart are the Smart Guys? A Unique View from Hedge Fund Stock Holdings.
By: John Griffin, University of Texas & Jin Xu, Zebra Capital Management
Published: August 21, 2006
Thanks go out to Mebane Faber at WorldBeta for giving us the heads up about this article. Mebane has an interesting blog that amounts to a live test of alpha-centric (or more accurately, beta-centric) investing.
Tons of research has been conducted on the return histories of hedge funds to forecast their future returns. From Bill Sharpe to David Hsieh, factor analysis has been used to determine the amount of alpha in a mutual fund or hedge fund. But according to Griffin and Xu, no one has actually lifted the hood on hedge funds to study their actual holdings in an effort to assess their investing skill. The two set out to answer the question: Do hedge fund long holdings out perform mutual fund (long) holdings?
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