Hedge Fund Performance During and After the Financial Crisis

To evaluate the performance of the different hedge fund indices, a benchmark is needed. From an investor's perspective, in Capital Market Theory, the Market portfolio offered the best reward-risk performance in an efficient market. The S and P 500 has been used as a proxy for the Market Portfolio in many hedge fund studies. Examples are the studies performed by Liang and Kat (2001), Amin and Kat (2003) or Stoforos et al. (2016). Capocci (2002) used a value-weighted portfolio of all stocks on the NYSE, Amex and Nasdaq, instead of only using the largest 500. The risk-free rate (rf) is represented by the one-month Treasury-bill rate from Ibbotson Associates. The Standard and Poor's index is a value-weighted index and consist of stocks issued by 500 large cap companies listed on the NYSE or NASDAQ. Due to its large proportion of total market value, it widely reflects the entire U.S. equity market and the economic health of the United States. As a result of globalisation in the financial markets the S and P, furthermore, reflects international events, to a large extent.