# kaal:claim:2748096-034

**Claim.** Traditional risk-adjusted alphas underestimate hedge fund risk: once correlation risk is controlled for, previously observed significant hedge fund alphas disappear, which makes correlation risk a systematic risk factor for hedge fund returns.

**Type.** failure  **Support.** evidenced

**Holds when.**

- cross-sectional analysis of individual hedge fund returns

**Source quote.**

> This finding is important because traditional risk-adjusted alphas may underestimate hedge fund risk.

**From.** Wulf A. Kaal, Timothy A. Krause, *Hedge Funds and Systemic Risk* (2016), POST-CRISIS EVIDENCE ON THE SYSTEMIC RISK OF HEDGE FUNDS, page 16

**Cite as.** Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096

**Verify.** sha256 of source PDF `8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Krause%20-%202016%20-%20Hedge%20Funds%20and%20Systemic%20Risk.pdf

**Failure mode.** alpha overstatement from omitted correlation risk  (family: measurement-and-metric-failure)

**Topics.** risk-and-incentives, research-methods

**Keywords.** correlation-risk, alpha, risk-adjustment, performance-measurement

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.