Fourth Quarter (2004)

Mila Getmansky, Andrew W. Lo and Shauna X. Mei We document the empirical properties of a sample of 1,765 funds in the TASS Hedge Fund database from 1977 to 2004 that are no longer active. The TASS sample shows that attrition rates differ significantly across investment styles, from a low of 5.2% per year on… Read more

Milind Sharma This paper highlights the inadequacies of traditional RAPMs (risk-adjusted performance measures) and proposes AIRAP (alternative investments risk-adjusted performance), based on Expected Utility theory, as a RAPM better suited to alternative investments. AIRAP is the implied certain return that a risk-averse investor would trade off for holding risky assets. AIRAP captures the full distribution… Read more

Harry M. Kat Over the last 20 years, investors have come to approach investment decision-making in an increasingly mechanical manner. Optimizers are filled up with historical return data and the “optimal” portfolio follows almost automatically. In this paper, we argue that such an approach can be extremely dangerous, especially when alternative investments such as hedge… Read more

Bing Liang In this paper, we study alternative investment vehicles such as hedge funds, funds-of-funds, and commodity trading advisors (CTAs) by investigating their performance, risk, and fund characteristics. Considering them as three distinctive investment classes, we study them not only on a stand-alone basis but also on a portfolio basis.We find several interesting results. First… Read more

William Fung and David A. Hsieh This paper shows empirically that Equity Long/Short (Equity L/S) hedge funds have significant alpha to both conventional as well as alternative (hedge fund-like) risk factors utilizing hedge fund data from three major data bases. Following the terminology introduced in Fung and Hsieh (2003) Journal of Fixed Income 58, 16-27… Read more

Stephen J. Brown, William N. Goetzmann and Bing Liang Funds of funds are an increasingly popular avenue for hedge fund investment. Despite the increasing interest in hedge funds as an alternative asset class, the high degree of fund-specific risk and the lack of transparency may give fiduciaries pause. In addition, many of the most attractive… Read more