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...

Hedge funds significantly reduced their equity holdings during the recent financial crisis. In 2008Q3-Q4, hedge funds sold about 29% of their aggregate portfolio. Redemptions and margin calls were the primary drivers of selloffs. Consistent with forced deleveraging, the selloffs took place in...

This paper studies the implications of opacity in fi nancial markets for investor behavior, asset prices, and welfare. Transparent funds (e.g. mutual funds) and opaque funds (e.g. hedge funds) trade transparent assets (e.g. plain-vanilla products) and opaque assets (e.g. structured products)....

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...

Hedge funds offer desirable risk-return profiles; but we also find high management fees, lack of transparency and worse, very limited liquidity (they are often closed to new investors and disinvestment fees can be prohibitive). This creates an incentive to replicate the attractive features of...