"Hedge funds have generated significant absolute returns (alpha) in the decade between 1995 and 2004. However, the level of alpha has declined substantially over this period. We investigate whether capacity constraints at the level of hedge fund strategies have been responsible for this decline....

Using detailed data on the currency transactions of institutional fund managers, this paper shows that funds that experience high returns on their currency holdings also incur lower transaction costs on their currency trades. This finding holds both in the cross section, i.e. funds that perform...

We propose a new method to model hedge fund risk exposures using relatively high frequency conditioning variables. In a large sample of funds, we find substantial evidence that hedge fund risk exposures vary across and within months, and that capturing within-month variation is more important...

To identify capacity constraints in hedge funds and simultaneously gauge how well-informed hedge fund investors are, we need measures of investor demand that do not affect deployed hedge fund assets. Using new data on investor interest from a secondary market for hedge funds, this paper verifies...

We examine trade credit links between firms as a channel of international return comovement. We model firms in different countries connected by trade credit links in segmented stock markets with asymmetrically informed investors. The model predicts that the cross-serial correlation of country...

Motivated by the literature on limits-to-arbitrage, we build an equilibrium model of commodity markets in which speculators are capital constrained, and commodity producers have hedging demands for commodity futures. Increases (decreases) in producers' hedging demand (speculators' risk-capacity)...

Employing a new dataset of over 9,000 expressed demands for over 700 hedge funds from a secondary market for hedge funds, this paper finds evidence suggesting that hedge fund investors rationally anticipate future hedge fund performance. Both buy and sell indications of interest arrive following...

We build an equilibrium model of commodity markets in which speculators are capital constrained, and commodity producers have hedging demands for commodity futures. Increases in producers' hedging demand or speculators' capital constraints increase hedging costs via price-pressure on futures....