A Note on the Dynamics of Hedge-Fund-Alpha Determinants

Olga Kolokolova, Didier Sornette (Editor), Sergey Ivliev (Editor), Hilary Woodard (Editor)

Research output: Chapter in Book/Report/Conference proceedingConference contribution


Various studies have analyzed the determinants of hedge fund performance. The majority of them, however, come to contradictory conclusions with respect to the direction of influence of different factors on fund performance. The key reason for the inconsistencies is the highly dynamic nature of hedge funds. This paper specifically focuses on the dynamics of the relations between hedge fund performance and various microeconomic factors. It quantifies shifts in the average fund alpha that result from changes in hedge fund style, age, size, and fee structure and investigates the time variation of these shifts. The empirical results highlight the dynamic nature of the hedge fund industry. Hedge funds seem to generate a positive and significant alpha on average; however, the alpha level varies considerably over time. It is hard to predict the exact absolute alpha level based on the hedge fund micro-factors, but it seems to be possible to rank hedge funds using the micro-information. The results suggest that large funds with high relative inflow, charging higher than median management fees, are likely to deliver a higher alpha than their peers most of the time.
Original languageEnglish
Title of host publicationMarket Risk and Financial Markets Modeling
EditorsD. Sornette , Didier Ivliev, Woodard Hilary
PublisherSpringer Nature
Number of pages24
ISBN (Electronic)9783642279317
ISBN (Print)9783642279300
Publication statusPublished - 28 Feb 2012
EventPerm Winter School - Perm, Russia
Duration: 3 Feb 20117 Feb 2011


ConferencePerm Winter School
CityPerm, Russia
Internet address


  • Hedge funds
  • performance dynamics
  • alpha


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