We develop a new factor selection methodology of spanning the space of hedge fund risk factors with all available exchange traded funds (ETFs). We demonstrate the efficacy of the methodology with out-of-sample hedge fund return replication, and find that the replication accuracy increases with...

This paper introduces a simple model of endogenous network formation and systemic risk. In the model, firms form joint ventures called ‘links' which are subsequently subjected to shocks that are either good or bad. Bad shocks incentivize default. Links yield full benefits only if the...

This paper introduces a model of endogenous network formation and systemic risk. In it, agents form networks that efficiently trade-off the possibility of systemic risk with the benefits of trade. Second, fundamentally ‘safer' economies generate higher interconnectedness, which in turn leads...