The returns of Hedge Funds- A comparative study of performance

Abstract: In this thesis we test the performance of hedge funds against several fund specific variables, mainly fund size. As a measure of the hedge funds performance we employ both excess and risk-adjusted returns. The first part the thesis employs unbalanced panel regressions where hedge funds excess returns are run on several fund specific variables. In the second part several financial performance measures (PM:s) are constructed for each fund and measured against fund size. The results largely confirm the theory from the Berk and Green model predicting decreasing returns to scale for funds. This however seems to be a truth with many modifications as the results differ widely at fund, strategy and geographic focus level. We also get vastly different results when switching between the two ways of measuring performance.