Hedge fund managers are adding a lot of performance

Aaron Pressman

CXO Advisory Group has posted a write-up of a fascinating paper by MIT’s resident financial genius, Professor Andrew Lo, and grad student Jasmina Hasanhodzic. The paper examines the performance of 1,610 hedge funds from 1986 to 2005 in 11 investment categories to determine how much of the returns could be attributed to manager smarts (known in the trade as alpha) versus exposure to basic market movements in bonds, stocks, currencies and so forth (known as beta).

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