This paper investigates whether the increase in assets flowing into the hedge fund industry diminishes returns and, in particular, whether larger hedge funds underperform smaller hedge funds, as is often conjectured, owing to limited capacity in certain hedge fund strategies. The impact of fund...

For investors it is important to know what trading strategies an asset manager pursues to generate excess returns. In this paper, we propose an alternative approach for analyzing trading strategies used in active investing. We use tracking error variance (TEV) as a measure of activity and...

We analyse time-varying risk premia and the implications for portfolio choice. Using Markov ChainMonte Carlo (MCMC) methods, we estimate a multivariate regime-switching model for the Carhart (1997) four-factor model. We find two clearly separable regimes with different mean returns,...