2nd Quarter (2007)

Nusret Cakici and Sris Chatterjee This paper examines the characteristics of merged hedge-funds. The data indicate that merged hedge-funds are larger funds that have underperformed over a two-year period prior to merger and have suffered from significantly lower money-flow prior to merger. Merged hedge-funds are also older funds. The fee structure of merged funds is… Read more

Yong Chen This paper examines the timing ability of hedge funds covering various investment categories. We extend the Treynor-Mazuy (1966) and Henriksson-Merton (1981) market timing models to a multiple market framework and propose the concept of a focus market in which a fund trades most actively. Concentrating on the focus market enables us to parsimoniously… Read more

William Fung and David A. Hsieh Hedge funds have grown substantially in the past few years even as hedge fund performance has declined with the rapid increase of capital. History tells us that over-priced, active managers will be replaced by low-cost, passive, index-like alternatives. Could the same process be taking place in the hedge fund… Read more

Craig French and Damian Ko This paper investigates the determinants of hedge fund portfolio performance — whether hedge funds exhibit security selection skill and market-timing skill. We examine a sample of 157 long-short equity hedge funds over the 10-year period from January, 1996 through December, 2005. To account for nonlinearities we employ the Treynor and… Read more

Jasmina Hasanhodzic and Andrew W. Lo In contrast to traditional investments such as stocks and bonds, hedge-fund returns have more complex risk exposures that yield additional and complementary sources of risk premia. This raises the possibility of creating passive replicating portfolios or clones” using liquid exchange-traded instruments that provide similar risk exposures at lower cost… Read more