Hedge fund performance persistence under different business cycles and stock market regimes

We examine different aspects of performance persistence of US hedge funds over different busi-ness cycles and stock market regimes. During periods of economic growth and bull stock markets, we report performance persistence for up to one year in the risk-adjusted returns of fund port-folios of different investment strategies, which is mainly driven by top fund performers. Perfor-mance persistence weakens dramatically during recession periods and bear stock markets. Our results are robust to different combinations of states of economic growth and stock market re-gimes. Trading strategies constructed on the basis of our results confirm the economic signifi-cance of our findings.