Market Dispersion and the Pro\u85tability of

We examine the impact of market dispersion on the performance of hedge funds. Market dispersion is measured by the cross-sectional volatility of equity returns in a given month. Using hedge fund indices and a panel of monthly returns on individual hedge funds, we \u85nd that market dispersion and the performance of hedge funds are positively related. We also nd that the cross-sectional dispersion of hedge fund returns is positively related to the level of market dispersion