AgPa #68: Machine-Learned Manager Selection (4/4)
A Cross-Sectional Machine Learning Approach for Hedge Fund Return Prediction and Selection (2021)
Wenbo Wu, Jiaqi Chen, Zhibin (Ben) Yang, Michael L. Tindall
Management Science 67(7), URL/SSRN
The fourth and at least for the moment final AGNOSTIC Paper on Machine Learned Manager Selection. After examining equity mutual funds in the last three papers, this week‘s authors provide an interesting out-of-sample test and explore machine learning models for selecting hedge funds. Importantly, this week‘s paper appeared in one of the leading business journals already back in 2021. This increases the likelihood that the results are actually robust and strengthens the evidence.
- Machine learning helps to identify outperforming hedge funds
- Risk measures and VIX-correlations are the most important features