Hedge fund performance attribution under various market conditions

Dimitrios Stafylas, Keith Anderson, Moshfique Uddin

Research output: Contribution to journalArticlepeer-review


We investigate US hedge funds' performance. Our proposed model contains exogenous and endogenous break points, based on business cycles and on a regime switching process conditional on different states of the market. During difficult market conditions most hedge fund strategies do not provide significant alphas. At such times hedge funds reduce both the number of their exposures to different asset classes and their portfolio allocations, while some strategies even reverse their exposures. Directional strategies share more common exposures under all market conditions compared to non-directional strategies. Factors related to commodity asset classes are more common during these difficult conditions whereas factors related to equity asset classes are most common during good market conditions. Falling stock markets are harsher than recessions for hedge funds.
Original languageEnglish
Pages (from-to)221-237
JournalInternational Review of Financial Analysis
Early online date31 Jan 2018
Publication statusPublished - 1 Mar 2018

Bibliographical note

© 2018, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International


  • Hedge funds
  • Performance
  • Statistical factors
  • Multi-factor models
  • Risk exposures
  • Alpha and beta returns


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