This chapter begins with a brief history of hedge funds from the perspective of hedge fund investors—exploring the attributes that attracted private, wealthy investors to an opaque, nascent hedge fund industry during the decades leading up to new millennium. Following the chronology of several...

This study presents a hedge fund portfolio choice model for an investor facing ambiguity. In the empirical section, we measure ambiguity as the cross-sectional dispersion in Industrial Production growth and in stock market return forecasts, and we construct the systematic ambiguity factors from...