A significant amount of research has been devoted to the predictability of traditional asset classes, but little is known about the predictability of returns emanating from alternative vehicles, such as hedge funds. We attempt to fill this gap by documenting evidence of predictability in hedge...

This paper introduces a novel method for the construction of equity indices that, unlike their cap-weighted counterparts, offer an efficient risk/return trade-off. The index construction method goes back to the roots of modern portfolio theory and focuses on the tangency portfolio, the portfolio...

This paper attempts to evaluate the out-of-sample performance of an improved estimator of the covariance structure of hedge fund index returns, focusing on its use for optimal portfolio selection. Using data from CSFB-Tremont hedge fund indices, we find that ex-post volatility of minimum...

Responses to a survey of investment management practitioners in Europe show that most practitioners are aware of key academic concepts in portfolio construction. But they still resort to ad hoc heuristics when they construct portfolios. Consideration of risk-return matters is less common in...

The focus of this paper is to determine what fraction a myopic risk-averse investor should allocate to investment strategies with convex exposure to stock market returns in a general economy with stochastically time-varying interest rates and equity risk premium. Our conclusion is that typical...

This paper provides a joint quantitative analysis of capital structure (debt versus equity) and debt structure (fixed versus floating) decisions in the presence of interest rate and inflation risks. Our analysis shows that debt management decisions have an impact on capital structure decisions....

In the context of a dynamic capital structure model with stochastic interest and inflation rates, we obtain analytical expressions for the price of, and optimal allocation to, various forms of liabilities classes, namely fixed-rate bonds, floating-rate bonds and inflation-indexed bonds, in...