Li, Sheng and Linton, Oliver (2007) Evaluating hedge fund performance: a stochastic dominance approach. Discussion paper, 591. Financial Markets Group, London School of Economics and Political Science, London, UK.
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Abstract
We introduce a general and flexible framework for hedge fund performance evaluation and asset allocation: stochastic dominance (SD) theory. Our approach utilizes statistical tests for stochastic dominance to compare the returns of hedge funds. We form hedge fund portfolios by using SD criteria and examine the out-of-sample performance of these hedge fund portfolios. Compared to performance of portfolios of randomly selected hedge funds and mean-variance e¢ cient hedge funds, our results show that fund selection method based on SD criteria greatly improves the performance of hedge fund portfolio.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://fmg.lse.ac.uk |
| Additional Information: | © 2007 The Authors |
| Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| Sets: | Research centres and groups > Financial Markets Group (FMG) Collections > Economists Online Collections > LSE Financial Markets Group (FMG) Working Papers |
| Date Deposited: | 22 Jul 2009 08:24 |
| Last Modified: | 27 Feb 2014 15:35 |
| URI: | http://eprints.lse.ac.uk/id/eprint/24486 |
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