Risk and Performance Estimation in Hedge Funds Revisited: Evidence from Errors in Variables

A. Coën*, G.M.B.J. Hübner

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


This paper revisits the performance of hedge funds in the presence of errors in variables. To reduce the bias induced by measurement error, we introduce an estimator based on cross sample moments of orders three and four. This higher moment estimation (hme) technique has significant consequences on the measure of factor loadings and the estimation of abnormal performance. Large changes in alphas can be attributed to measurement errors at the level of explanatory variables, while we emphasize some shifts in the economic contents of the equity risk premiums by switching from ols to hme.
Original languageEnglish
Pages (from-to)112-125
Number of pages14
JournalJournal of Empirical Finance
Issue number1
Publication statusPublished - 1 Jan 2009

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