Show simple item record

dc.contributor.advisorSunderam, Adi
dc.contributor.authorZeng, Sarah
dc.date.accessioned2021-07-19T03:59:44Z
dash.embargo.terms2021-12-23
dc.date.created2021
dc.date.issued2021-06-17
dc.date.submitted2021
dc.identifier.citationZeng, Sarah. 2021. In Pursuit of Alpha: Cross-Sectional Dispersion, Market Correlation, and Lagging Hedge Fund Returns. Bachelor's thesis, Harvard College.
dc.identifier.other28410519
dc.identifier.urihttps://nrs.harvard.edu/URN-3:HUL.INSTREPOS:37368553*
dc.description.abstractThis paper investigates the mechanism behind lagging hedge fund returns in recent years and specifically studies the effects of market correlation and cross-sectional dispersion of stock returns on fund performance. To analyze returns, I present a top-down model that relates individual stock-picking ability and macroeconomic conditions to fund performance. The model predicts that the 1-month lagging cross-sectional dispersion has on average a positive effect on returns and effective alpha, while correlation has on average a negative effect. Using data from 2007 to 2020, I calculate hedge fund alpha on a rolling basis and obtain results that are in line with these predictions. On average, the effects of lagging dispersion and correlation on fund performance, disregarding strategy, are approximately equal in magnitude and opposite in sign. Once funds are broken down by strategy, however, differences in dispersion explain more of the variation in returns and alphas than does correlation. From this result, this paper shows that individual stock-picking abilities, as represented via the measure for cross-sectional dispersion, have on average a larger impact on hedge fund returns than macroeconomic conditions, as represented via correlation.
dc.format.mimetypeapplication/pdf
dc.language.isoen
dash.licenseLAA
dc.subjectAlpha
dc.subjectCross-sectional dispersion
dc.subjectHedge fund performance
dc.subjectHedge fund returns
dc.subjectHedge funds
dc.subjectStock market correlation
dc.subjectEconomics
dc.subjectFinance
dc.titleIn Pursuit of Alpha: Cross-Sectional Dispersion, Market Correlation, and Lagging Hedge Fund Returns
dc.typeThesis or Dissertation
dash.depositing.authorZeng, Sarah
dash.embargo.until2021-12-23
dc.date.available2021-07-19T03:59:44Z
thesis.degree.date2021
thesis.degree.grantorHarvard College
thesis.degree.levelBachelor's
thesis.degree.levelUndergraduate
thesis.degree.nameAB
dc.type.materialtext
thesis.degree.departmentApplied Mathematics
dash.author.emailsyzeng99@gmail.com


Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record