This paper is the first to present a two-stage peer group benchmarking approach to evaluate the performance of hedge funds. We present different ways of orthogonalizing the peer group benchmarks and discuss their general properties. We then orthogonalize the relevant benchmarks against...

Measuring the performance of stock portfolios that include options is challenging due to options' nonlinearity in the underlying, their exposure to volatility risk, and their time decay. Our contribution to the literature is twofold: First, we provide a theoretically rigorous derivation of the...