The Economics of Hedge Funds: Alpha, Fees, Leverage, and Valuation

Preprint OPEN
Yingcong Lan; Neng Wang; Jinqiang Yang;
(2011)
  • Subject:
    • 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
  • References (15)
    15 references, page 1 of 2

    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.

    Ackermann, C., R. McEnally, and D. Ravenscraft, 1999, \The performance of hedge funds: risk, return, and incentives," Journal of Finance, 54, 833-874.

    Agarwal, V, and N. Y. Naik, 2004, \Risks and portfolio decisions involving hedge funds," Review of Financial Studies, 17, 63-98.

    Ang, A., S. Gorovyy, and G. B. van Inwegen, 2010, \Hedge fund leverage," Working paper, Columbia University.

    Brown, S. J., W. N. Goetzmann, and R. G. Ibbotson, 1999, \O shore hedge funds: Survival and performance, 1989-1995," Journal of Business, 72, 91-119.

    Brown, S. J., W. N. Goetzmann, R. G. Ibbotson, and S. A. Ross, 1992, \Survivorship bias in performance studies," Review of Financial Studies, 5, 553- 580.

    Brown, S. J, W. N. Goetzmann, and J. Park, 2001, \Careers and survival: competition and risk in the hedge fund and CTA industry," Journal of Finance, 56, 1869-1886.

    Brunnermeier, M., and L. Pedersen, 2009, \Market liquidity and funding liquidity," Review of Financial Studies, 22, 2201-2238.

    Berk, J. B., and R. C. Green, 2004, \Mutual fund ows and performance in rational markets," Journal of Political Economy, 112, 1269-1295.

    Goetzmann, W. N., J. Ingersoll, and S. A. Ross, 2003, \High-water marks and hedge fund management contracts," Journal of Finance, 58, 1685-1717.

  • Metrics
Share - Bookmark