A significant amount of research has been devoted to the predictability of traditional asset classes, but little is known about the predictability of returns emanating from alternative vehicles, such as hedge funds. We attempt to fill this gap by documenting evidence of predictability in hedge...

This paper attempts to evaluate the out-of-sample performance of an improved estimator of the covariance structure of hedge fund index returns, focusing on its use for optimal portfolio selection. Using data from CSFB-Tremont hedge fund indices, we find that ex-post volatility of minimum...

This article provides the key findings of Edhec European Alternative Multi-management Practices Survey. It provides a detailed summary of the results of the survey of the 61 multimanagers carried out, as well as details of the research performed both by Edhec and numerous other professional and...

Many investors do not know with certainty when their portfolio will be liquidated. Should their portfolio selection be influenced by the uncertainty of exit time? In order to answer this question, we consider a suitable extension of the familiar optimal investment problem of Merton [Merton,...

Given the increasing importance of funds of hedge funds in the development of the hedge fund industry and the cost-intensive nature of multi-manager structures, investors are questioning whether FoHF add value to an extent that justifies the extra layer of fees induced by their activity. To...

In this paper, we formally show that the cross-sectional variance of stock returns is a consistent and asymptotically efficient estimator for aggregate idiosyncratic volatility. This measure has two key advantages: it is model-free and observable at any frequency. Previous approaches have used...

La gestion alternative connaît actuellement un engouement certain, tant de la part des investisseurs que des gérants qui y voient une parade efficace à la volatilité des marchés financiers. Cet intérêt ne saurait cependant occulter les risques auxquels sont exposés les hedge funds. Cet...