Equity Markets and the Performance of Hedge Funds: How stable is Persistence?

Abstract

We investigate the performance of hedge funds in
bull and bear equity markets. Covering the period from January
1994 to December 2008, we find that each bull and bear market
period has its dominant independent variables. Furthermore, the
level of performance persistence is not significantly related to
equity market conditions. The analyses show that hedge fund
performance persistence is stronger in more recent sub-periods
than in earlier sub-periods. In bullish as well as in bearish equity
markets, performance persistence is driven by both constant
winners and losers. Moreover, both live and dead funds exhibit
statistically significant levels of performance persistence.