The Economics of Hedge Funds: Alpha, Fees, Leverage, and Valuation
Yingcong Lan; Neng Wang; Jinqiang Yang;
jel: jel:G11 | jel:G2 | jel:G32
Hedge fund managers are compensated via management fees on the assets under management (AUM) and incentive fees indexed to the high-water mark (HWM). We study the effects of managerial skills (alpha) and compensation on dynamic leverage choices and the valuation of fees... View more
5For the presence of survivorship bias, selection bias, and back- lling bias in hedge funds databases, see Brown, Goetzmann, Ibbotson, and Ross (1992), and Brown, Goetzmann, and Ibbotson (1999), among others. For careers and survival, see Brown, Goetzmann, and Park (2001). 6Few hedge funds are able to directly issue long-term debt or secure long-term borrowing.
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