As conventional asset pricing models have been proven inappropriate to adequately explain hedge fund performance, this study proposes an innovative, flexible and efficient hedge fund multifactor model to explain dynamic risk and return properties of core hedge fund strategies. The proposed model...

For 5,500 North American hedge funds following 11 different strategies, we analyse the stand-alone performance of these strategies using a stochastic discount factor approach. Employing the same data, we then consider the diversification benefits of each hedge fund strategy when combined with a...

We examine the relative weights hedge fund investors attach to past information in the fund selection process. The weighting scheme appears inconsistent with the one of econometric forecast models that predict fund returns, alphas or Sharpe ratios. In particular, investor flows are highly...

Little is known about the exact sources and risks of hedge fund's market neutral strategies. Based on existing views on arbitrage trading, such as done by hedge funds, we formulate and test a hypothesis that market neutrality is affected by market-wide liquidity. We find that such is the case...