We investigate the performance and risk of currency hedge funds using a large and unique consolidated currency hedge fund data- set. We fi nd that a substantial number of hedge funds generate returns that exceed foreign exchange risk premia obtained through carry trades. The best alpha-generating funds exhibit a perfor- mance that persists over a one-year horizon. This performance persistence is mostly due to compensation for currency risk-taking as there is no strong evidence of remuneration for active man- agement. The results are robust to biases affecting hedge fund returns, alternative carry trade benchmarks and different meth- odologies used to correct for sample variability

Carry trades and the performance of currency hedge funds / Nucera, FEDERICO CALOGERO; Valente, Giorgio. - In: JOURNAL OF INTERNATIONAL MONEY AND FINANCE. - ISSN 0261-5606. - 33:(2013), pp. 407-425. [10.1016/j.jimon fi n.2012.12.001]

Carry trades and the performance of currency hedge funds

NUCERA, FEDERICO CALOGERO;
2013

Abstract

We investigate the performance and risk of currency hedge funds using a large and unique consolidated currency hedge fund data- set. We fi nd that a substantial number of hedge funds generate returns that exceed foreign exchange risk premia obtained through carry trades. The best alpha-generating funds exhibit a perfor- mance that persists over a one-year horizon. This performance persistence is mostly due to compensation for currency risk-taking as there is no strong evidence of remuneration for active man- agement. The results are robust to biases affecting hedge fund returns, alternative carry trade benchmarks and different meth- odologies used to correct for sample variability
Foreign exchange; Asset allocation; Hedge Funds; Funds performance evaluation
Carry trades and the performance of currency hedge funds / Nucera, FEDERICO CALOGERO; Valente, Giorgio. - In: JOURNAL OF INTERNATIONAL MONEY AND FINANCE. - ISSN 0261-5606. - 33:(2013), pp. 407-425. [10.1016/j.jimon fi n.2012.12.001]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/78263
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