An Examination of Stockpicking Ability
Countless industry conferences and dinners are devoted to “Hedge Fund Best Ideas,” while fund managers are popularly lionized as stock picking gurus. Epsilon Asset Management has partnered with Professor Andrew Papanicolaou (NYU) to produce a comprehensive quantitative study that examines the regulatory mandated portfolio positions of nearly 1,500 hedge funds from 1999 to 2018. We seek to quantify the stock picking skill of these vaunted managers and to see whether their Best Ideas truly outperform the market and deserve the attention they receive.
Hedge Fund Best Ideas
We calculated nine different methods for eliciting a 'Best Idea' from a portfolio of positions. We tested to see if those Best Ideas outperform the other positions in a fund manager's portfolio. What we found was startling.
For those technically inclined, we’ve posted portions of our research in code on our Github. Click through, explore the actual regression analyses, and take a look at statistical output and time series charts for dozens of unpublished studies.View Our Repository
For those academically inclined, you can read the actual academic research on SSRN.Academic Paper
The information contained in this research piece was obtained from various sources that Epsilon Asset Management, LLC (“Epsilon”) believes to be reliable, but Epsilon does not guarantee its accuracy or completeness. The information and opinions contained on this site are subject to change without notice.
Neither the information nor any opinion contained on this site constitutes an offer, or a solicitation of an offer, to buy or sell any securities or other financial instruments, including any securities mentioned in any report available on this site.
The information contained on this site has been prepared and circulated for general information only and is not intended to and does not provide a recommendation with respect to any security. The information on this site does not take into account the financial position or particular needs or investment objectives of any individual or entity. Investors must make their own determinations of the appropriateness of an investment strategy and an investment in any particular securities based upon the legal, tax and accounting considerations applicable to such investors and their own investment objectives. Investors are cautioned that statements regarding future prospects may not be realized and that past performance is not necessarily indicative of future performance.
Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2020. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark(s) of the relevant LSE Group companies and is/are used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.