Research co-authored by Associate Professor Adam Aiken in the Martha and Spencer Love School of Business challenges conventional wisdom about the investment prowess of hedge fund managers by using a new method to evaluate stock selections and market timing.
In the labyrinthine realm of finance and investment, hedge fund managers stand as enigmatic entities, often perceived as masterful navigators of stock selection and market timing.
Associate Professor Adam Aiken, Elon University’s Wesley R. Elingburg Professor in Business, recently joined with Minjeong Kang at South Korea’s National Pension Fund to demystify that perceived wizardry by scrutinizing their performance over a span of nearly two decades.
In research published this fall in Finance Research Letters, Aiken and Kang shared a new method to categorize the performance of hedge funds from 1999-2017 by considering stock selection, market timing, and timing based on market liquidity.
Findings suggest that while some managers consistently excel in stock selection, their market-timing abilities aren’t particularly strong and that the skills of the top managers may be on an overall decline.
Aiken and Kang caution that more research is needed. Their exclusive focus on long-only stock positions might not capture all the intricacies of how hedge funds operate. The study doesn’t account for strategies like short-selling or the use of advanced financial instruments.
“We discuss hedge funds and performance measurement in courses like Trading and Markets and Data Analysis in Finance.” Aiken said. “Staying active in my research and close to the data helps me bring modern methods and ideas into the classroom.”
Since joining the faculty of the Martha and Spencer Love School of Business in 2015, Aiken has researched and taught in areas that include financial modeling, data analysis in finance, and trading and markets. His research has been featured by The Economist, The Financial Times, Alpha, and Reuters, among other media outlets.
He also works with students to manage a portion of Elon University’s endowment through the Business Fellows Portfolio Class.
Aiken received his doctorate in finance from Arizona State University, a master’s degree in economics from Duke University and a bachelor’s degree in business administration from the University of North Carolina at Chapel Hill. Prior to joining the faculty at Elon, Aiken served as an assistant professor of finance at Quinnipiac University in Hamden, Connecticut.
He has been among the leaders in the development of Elon University’s financial technology (FinTech) major introduced this fall.