Do Hedge Funds Ride Market Irrationality or Bet Against It ?

Do Hedge Funds Ride Market Irrationality or Bet Against It ?

Radovan Vojtko Radovan Vojtko

Radovan Vojtko

Quantpedia.com - The Encyclopedia of Algorithmic & Quantitative Trading Strategies

发布日期: 2018年5月14日
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We have a new blog post about a research paper written by Liang and Zhang:

Do Hedge Funds Ride Market Irrationality?

https://quantpedia.com/Blog/Details/do-hedge-funds-ride-market-irrationality-or-bet-against-it

Shortly:

"We document significant evidence that hedge funds temporarily ride rather than attack high market irrationality. Irrationality-riding funds outperform irrationality-attacking funds by 4.4% per year on a risk-adjusted basis. This outperformance is attributed to irrationality-riding during high irrationality periods-the formation period of the tech-bubble, and the bursting period of the housing bubble. The adoption of irrationality riding strategy is related to manager skill as well as investment styles. Our results are consistent with the behavioral theories that sophisticated investors ride rather than attack unsophisticated investors’ strong misperception."

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