We provide an empirical analysis of two important phenomena influencing the hedge fund industry—contagion and time variation in risk adjusted return (alpha)—in a flexible unified framework. After accounting for standard hedge fund pricing factors, we quantify the common latent factor in...

The asymmetric response of conditional variances to positive versus negative news has been traditionally modeled with threshold specifications that allow only two possible regimes: low or high volatility. In this paper, the possibility of intermediate regimes is considered and modeled with the...