Hedge funds implement elaborate investment strategies that include a variety of positions and assets. As a result, there is significant time variation in the set of risk factors and their respective loadings which in turn introduces severe model risk in any attempt to model and forecast hedge...

While the majority of the predictability literature has been devoted to the predictability of traditional asset classes, the literature on the predictability of hedge fund returns is quite scanty. We focus on assessing the out-of-sample predictability of hedge fund strategies by employing an...

Hedge funds have the most sophisticated risk management practices; however, hedge funds also appear to have a short lifetime relative to other managed funds. In this study, we investigate the failure probabilities of hedge funds — particularly the failures due to financial distress. We...

Hedge fund managers are largely free to pursue dynamic trading strategies and standard linear regression is no longer accurate for measuring hedge fund abnormal return (alpha) and risk exposure (beta). Accordingly, this paper presents a dynamic linear model to capture hedge fund dynamics. By...

Extending previous work on hedge fund return predictability, this paper introduces the idea of modelling the conditional distribution of hedge fund returns using Student-t full-factor multivariate GARCH models. This class of models takes into account the stylized facts of hedge fund return...

This article analyzes the effect of liquidity risk on the performance of equity hedge fund portfolios. Similarly to Avramov, Kosowski, Naik, and Teo, we observe that, before accounting for the effect of liquidity risk, hedge fund portfolios that incorporate predictability in managerial skills...