재무연구 제 권 호 (2018년 5월)
Asian Review of Financial Research, Vol., No..
pp.1469~1492
pp.1469~1492
Do Peso Problems Explain Positive Alpha in Hedge Funds?
Jung-Min Kim Associate Professor of Finance College of Business Administration The University of Seoul
Hedge funds are known to produce significantly positive OLS-regression alphas. I test whether the positive OLS alpha could be consistent with a rational outcome from a peso problem. To test this, I construct a two-state regime-switching model which can capture a potential future crash state with a small probability. By applying the time-series version of testing a peso problem, I provide evidence that an ex-ante rational expectation of zero alpha can frequently produce an expost positive OLS alpha. My results suggest that the positive OLS alpha in hedge funds can be a rational outcome.
Jung-Min Kim
Hedge funds are known to produce significantly positive OLS-regression alphas. I test whether the positive OLS alpha could be consistent with a rational outcome from a peso problem. To test this, I construct a two-state regime-switching model which can capture a potential future crash state with a small probability. By applying the time-series version of testing a peso problem, I provide evidence that an ex-ante rational expectation of zero alpha can frequently produce an expost positive OLS alpha. My results suggest that the positive OLS alpha in hedge funds can be a rational outcome.
