Back to activities
“Meet a GERAD researcher!” seminar

Is it Alpha or Beta? Decomposing Hedge Fund Returns When Models are Misspecified


Feb 28, 2024   11:00 AM — 12:00 PM

David Ardia Associate Professor, Department of Decision Sciences, HEC Montréal, Canada

David Ardia

Presentation on YouTube.

We develop a novel approach to separate alpha and beta under model misspecification. It comes with formal tests to identify less misspecified models and sharpen the return decomposition of individual funds. Our hedge fund analysis reveals that: (i) prominent models are as misspecified as the CAPM, (ii) several factors (time-series momentum, variance, carry) capture alternative strategies and lower performance in all investment categories, (iii) fund heterogeneity in alpha and beta is large—an important result for fund selection and models of active management, (iv) performance is increasingly similar to mutual funds, (v) fund valuation is sensitive to investor sophistication.

Olivier Bahn organizer


Online meeting
Montréal Québec

Research Axis

Research application