We investigate incentive effects of a typical hedge-fund contract for a manager with power utility. With a one-year horizon, she displays risk-taking that varies dramatically with fund value. We extend the model to multiple yearly evaluation periods and find her risk-taking is rapidly moderated...

Murphy, Koehler, and Fogler [1997] gave in the last issue of the Journal of Portfolio Management an account of how to raise a neural net’s IQ. The purpose of this reply is to point out some of the general difficulties with neural nets. Also, I would like to mention an alternative method,...

This paper summarizes a program of research we have conducted over the past four years. So far, it has produced two published articles, one forthcoming paper, one working paper currently under review at a journal, and three working papers in progress. The research concerns the recovery of...

Numerous hedge funds stop reporting each year to commercial data bases, wreaking havoc with analyzing investment strategies which incur the unobserved delisting return. We use estimated portfolio holdings for funds-of-funds to back out estimated hedge-fund delisting returns. For all exiting...

We construct a panel of S&P 500 index call and put option portfolios, daily adjusted to maintain targeted maturity, moneyness, and unit market beta, and test multi-factor pricing models. The standard linear factor methodology is applicable because the monthly portfolio returns have low skewness...