Mandatory filings for UK hedge funds allow analysis of the effect of managerial employment networks on investment behavior. Employment in the same firm leads to significantly more similar investment behavior in terms of raw returns, abnormal performance (alpha), systematic risk (beta), and...

This study presents a hedge fund portfolio choice model for an investor facing ambiguity. In the empirical section, we measure ambiguity as the cross-sectional dispersion in Industrial Production growth and in stock market return forecasts, and we construct the systematic ambiguity factors from...

Do returns in private equity (PE) rise or fall with fund scale? This question is increasingly urgent amid larger funds and new focus on the retail market. Since better managers can raise larger funds, the causal effect is difficult to identify. We develop an instrument based on gifts to...

We provide novel evidence that hedge fund performance is persistent following weak hedge fund markets, but is not persistent following strong markets. Specifically, we construct two performance measures, DownsideReturns and UpsideReturns, conditioned on the level of overall hedge fund sector...

Indirect incentives exist in the money management industry when good current performance increases future inflows of capital, leading to higher future fees. For the average hedge fund, indirect incentives are at least 1.4 times as large as direct incentives from incentive fees and managers'...

This chapter provides a perspective on the rapidly developing literature on investment performance evaluation. I use the stochastic discount factor approach to present and critique current performance measurement techniques in a unified setting. I offer a number of suggestions to improve...

We propose the bear beta, i.e. the sensitivity of hedge funds to a bear spread portfolio orthogonalized to the market, as a novel way of classifying funds as insurance buyers or sellers. We find that low bear beta funds (insurance sellers) outperform high bear beta funds (insurance buyers) by...

This chapter begins with a brief history of hedge funds from the perspective of hedge fund investors—exploring the attributes that attracted private, wealthy investors to an opaque, nascent hedge fund industry during the decades leading up to new millennium. Following the chronology of several...

This study examines the phenomenon of performance persistence of equity funds in Hungary in two time perspectives: 1-year and 6-month perspectives. The empirical results confirm the occurrence of performance dependence in consecutive periods. There is also a strong evidence of short-term...