# kaal:claim:2748096-035

**Claim.** Once liquidity risk is incorporated into the analysis, the superior performance previously attributed to predictability in managerial skills disappears in hedge fund portfolios.

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

**Holds when.**

- hedge fund portfolios formed on predictability in managerial skill

**Source quote.**

> They find that the outperformance previously attributed to predictability in managerial skills disappears in hedge fund portfolios when accounting for liquidity 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 15

**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.** skill premium vanishes under liquidity risk  (family: measurement-and-metric-failure)

**Topics.** defi, risk-and-incentives

**Keywords.** liquidity-risk, managerial-skill, outperformance, return-predictability

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