Fund liquidation, self-selection and look-ahead bias in the hedge ...

8: Persistence Estimates (Raw returns), alternative classification
Table
performance (raw returns)
Average
Four-Quarters
(2) (3) (1) - (3)
(1)
non corrected corrected double corrected
Decile
1(losers) 0.1601 0.0922 0.0826 0.0775
2 0.1658 0.1424 0.1370 0.0288
3 0.1459 0.1235 0.1213 0.0246
4 0.1451 0.1323 0.1321 0.0129
5 0.1418 0.1372 0.1344 0.0074
6 0.1342 0.1288 0.1290 0.0052
7 0.1403 0.1340 0.1341 0.0090
8 0.1565 0.1556 0.1581 −0.0016
9 0.1900 0.1835 0.1806 0.0093
quarter, funds are sorted into ten rank portfolios based on their previous
Each
returns, respectively. Next, average returns over the next four quar-
four-quarter
are computed, for each decile. Using returns from 1994-2000, this produces a
ters
for each decile of 17 (overlapping) average four-quarter returns. The
time-series
in the table are the annualized time-series averages and their standard
numbers
in parentheses. The standard errors are corrected for autocorrelation based
errors
the Newey-West approach. The corrected figures employ a weighting procedure
on
to eliminate liquidation bias, and the double corrected employ a weighting
to eliminate liquidation and self-selection bias. This table is based on
procedure
alternative classification of cases as "liquidated” or “self-selected” (see text).
an
(0.0911) (0.0960) (0.0957) (0.0210)
(0.0600) (0.0542) (0.0528) (0.0142)
(0.0455) (0.0408) (0.0400) (0.0134)
(0.0387) (0.0365) (0.0350) (0.0081)
(0.0252) (0.0242) (0.0270) (0.0054)
(0.0318) (0.0369) (0.0361) (0.0089)
(0.0381) (0.0396) (0.0400) (0.0095)
(0.0325) (0.0337) (0.0339) (0.0087)
(0.0468) (0.0479) (0.0471) (0.0097)
10 (winners) 0.2029 0.1844 0.1824 0.0204
(0.1016) (0.1006) (0.0995) (0.0131)
winners - losers 0.0428 0.0922 0.0998 −0.0570
(0.0693) (0.0728) (0.0720) (0.0188)
26