This paper investigates the determinants of money-flows, nature of managerial incentives, behavior of investors, and drivers of performance in the hedge fund industry. It examines performance-flow relation and finds that funds with good recent performance, greater managerial incentives, and...

Using a comprehensive hedge fund database, we examine the role of managerial incentives and discretion in hedge fund performance. Hedge funds with greater managerial incentives, proxied by the delta of the option-like incentive fee contracts, higher levels of managerial ownership, and the...

This paper characterizes the systematic risk exposures of hedge funds using buy-and-hold and option-based strategies. Our results show that a large number of equity-oriented hedge fundstrategies exhibit payoffs resembling a short position in a put option on the market index, and therefore bear...

Recently, there has been rapid growth in the assets managed by ldquo;hedged mutual fundsrdquo;mdash; mutual funds mimicking hedge fund strategies.We examine the performance of these funds relative to hedge funds and traditional mutual funds. Despite using similar trading strategies, hedged...

Since hedge funds specify significant lockup periods, we investigate persistence in the performance of hedge funds using a multi-period framework in which the likelihood of observing persistence by chance is lower than that in the traditional two-period framework. Under the null hypothesis of no...

Since hedge funds specify significant lockup periods, we investigate persistence in the performance of hedge funds using a multi-period framework in which the likelihood of observing persistence by chance is lower than that in the traditional two-period framework. Under the null hypothesis of no...

In this paper, we identify and document the empirical characteristics of the key drivers of convertible arbitrage as a strategy and how they impact the performance of convertible arbitrage hedge funds. We show that the returns of a buy-and-hedge strategy involving taking a long position in...

In 1997, the London Stock Exchange, like NASDAQ, allowed the public to compete directly with dealers in a subset of stocks through the submission of limit orders. However, unlike NASDAQ, for these stocks, London also removed the obligation of dealers to quote firm two-way prices, and became a...

This paper examines how bond dealers use futures markets to manage the hedgeable market risk component of their core business risk exposure, and whether market quality is adversely affected by their selective risk taking activity. It also investigates risk sharing among bond dealers in the...

This paper investigates whether dealers' trading and pricing decisions are governed by their equivalent inventories, based on total returns as in Ho and Stoll (1983) or on unhedgeable returns as in Froot and Stein (1998), or by their ordinary inventories, as would be the case in a decentralized...