Performance of hedge funds and their implication in portfolio selection.

Summary This thesis focuses on the study of the performance of hedge fund strategies and its implication in portfolio selection. The objective of this doctoral work is twofold. On the one hand, we have attempted to complete the studies dealing with the performance of hedge funds for long-term investment, a subject that has not been widely treated in the literature. On the other hand, we wanted to enrich the studies dealing with the diversification gains offered by hedge fund strategies. In the first chapter we presented the characteristics of alternative management and more specifically hedge funds as an alternative investment vehicle. We emphasized that hedge funds represent a family of alternative investment vehicles by studying their origins and history. In the second chapter, we highlight a literature review of the main studies on hedge funds, namely hedge fund performance evaluation, management styles and performance evaluation problems. Chapter 3 is an attempt to understand and answer one of the questions concerning the performance of hedge funds over the long term. Chapter 4 presents a study of the impact of adding hedge fund strategy indices to a portfolio of equity and real estate indices. Chapter 5 attempts to address criticisms of the Grauer and Hakansson (1985) method, which uses historical averaging. Thus, we have improved the estimators of the mean by using the shrinking mean estimators proposed by Jorion (1985, 1986, 1991). The results of our study confirm the contribution of hedge funds in portfolio diversification. We find that by eliminating the bias of the historical estimator of the mean, the composition of the optimal portfolio changes substantially and contributes to an improvement in portfolio performance.