Abstract
After the 2008 financial crisis, hedge funds regained their popularity. Investors naturally wonder whether it is possible to predict and explain hedge fund returns just as its constituents. To answer this question, we examined hedge fund performance of 14 strategies from 2000 to 2017 by separating them into 3 groups. After deriving a statistical model, we applied it to the period of 2017-2022 and examined the errors. We observed that most strategies have a positive risk-adjusted rate of return and the current periods returns have a positive relationship with the previous periods. We concluded that monthly return has too much randomness while 3 strategies yearly returns in the middle quantile could be predicted. More historical return data can improve the accuracy of the model.
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