type="main" <title type="main">ABSTRACT</title> <p>Hedge fund managers are subject to several nonlinear incentives: performance fee options (call); equity investors' redemption options (put); and prime broker contracts allowing for forced deleverage (put). The interaction of these option-like incentives affects optimal...</p>

We apply a new bootstrap statistical technique to examine the performance of the U.S. open-end, domestic equity mutual fund industry over the 1975 to 2002 period. A bootstrap approach is necessary because the cross section of mutual fund alphas has a complex nonnormal distribution due to...