Despite occasional divergence, hedge fund indices found to be relatively “homogeneous” after all
| Sep 7th, 2009 | Filed under: Academic Research, Hedge Fund Industry Trends, Today's Post | By: Alpha Male |
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Back in March, we examined the divergence of several leading hedge fund industry barometers over 2008. As a result of this analysis, we concluded that the hedge fund databases appeared, statistically speaking, to be quite different. In fact, we wondered if the various indices were even measuring the same industry.
But our conclusion may have been premature. A new study by Oliver Dietiker of the University of Basel concludes that the various hedge fund indices actually do provide the same picture of hedge fund performance.
Dietiker begins by calculating the average correlation between pairs of hedge fund sub-indices. He finds that the broad (headline) indices and most of the sub-indices from different providers are actually pretty well correlated. The chart below was created from data in Dietiker’s paper: More…
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