Are hedge fund returns predictable?

While earlier empirical research found that stock, bond and hedge fund returns can be predicted with conventional financial and economic variables, recent econometric studies have shown that predictive regressions are spurious when the forecasting instrument is a non,stationary variable. After examining the predictability of hedge fund index returns with stationary forecasting variables, our findings suggest that the forecasting variables discovered in previous studies are statistically insignificant at predicting hedge fund index returns.