Article ID Journal Published Year Pages File Type
963971 Journal of International Money and Finance 2013 19 Pages PDF
Abstract

We investigate the performance and risk of currency hedge funds using a large and unique consolidated currency hedge fund dataset. We find 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 performance 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 management. The results are robust to biases affecting hedge fund returns, alternative carry trade benchmarks and different methodologies used to correct for sample variability.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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