An analyst is examining the performance of hedge funds. He looks at the 90 hedge funds that are in existence today and notes that the average annual return on these funds during the last 10 years is 25.1 7 percent. The standard deviation of these returns is 17.43 percent and the Sharpe ratio is 1.15. The analyst also observes that the average of the annual returns on a stock market index during the last 10 years is 14.83 percent. The standard deviation of these returns is 11.87 percent and the Sharpe ratio is 0.81. The analyst concludes that the hedge funds have substantially outperformed the stock market index. Discuss why the comparison by the analyst could be misleading.