Hedge fund flows chase alpha, yet they also follow returns attributable to traditional and exotic risk exposures … being more likely to emphasize returns arising from exotic risks. Although we find strong evidence of persistence for alpha …

α (“Alpha”) has symbolic importance on the investments side of finance. That is, a fundamental pillar of modern finance … theory is the risk-return relation, and traditionally alpha is taken to represent the degree of “mispricing” in asset returns …. But, such an interpretation is not always appropriate – seemingly paradoxically, for certain specific setups alpha …