Ithaca NY--An Ithaca College study presented to the Annual Global Business Conference in November 2006 showed that hedge funds outperformed Standard & Poors 500 index during the period 1990 to 2005.
The study, conducted by Assistant Professor of Finance and International Business Vigdis Boasson with undergraduate finance major Andreas Lindblom’07, hypothesized that investment strategies used by hedge funds are based on solid financial theories and hence are likely to outperform the market even on a risk-adjusted basis. The study examined 12 major strategies used in hedge funds and concluded that each of these strategies outperform S&P 500 market index on a risk-adjusted basis.
The study used a sample of 7,809 hedge funds with a total of 483,975 monthly return observations from 1972 to 2005 to compute the historical returns based on each fund strategy. Additionally, the study collected monthly data on hedge fund indices, based on hedge fund strategies for the period 1990 to 2005, yielding 72,000 observations. The benchmarking analysis employed the index data for the period 1990 to 2005.
Lindblom who presented the paper at the conference remains enthusiastic about hedge funds.
“Today hedge funds are a playground for the rich,” said Lindblom “But this is the future of investing and it will hopefully become more available to ordinary investors, as the word “future” and “hedge funds” go hand-in-hand,” he said.