Hedge Funds addresses the pressing need for a systematic framework for managing hedge fund investments. Arguing that hedge funds have very different risk and return characteristics than traditional investments, this book introduces new tools for analyzing their dynamics, including measures of illiquidity exposure and performance smoothing, linear and nonlinear risk models that capture alternative betas, econometric models of hedge fund failure rates, and integrated investment processes for alternative investments.
Praise for Hedge Funds
"Andrew Lo's Hedge Funds is likely to be the high-water mark in the analysis of Hedge Funds for years to come. Focusing on Hedge Fund returns and trading strategies, risk characteristics, and potential for illiquidity, Lo brings to bear his always fresh and insightful thinking."
― Richard Bookstaber, author of A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
"Lo offers a truly unique perspective. He examines the properties of returns and illiquidity in great detail and introduces an innovative concept of mean-variance-liquidity optimization, something that no other book on hedge funds has addressed."
― Narayan Naik, London Business School
"This book provides a useful and very timely overview of key aspects of the hedge fund industry. It summarizes the basic properties of hedge fund returns, discusses why traditional performance measures may be misleading when analyzing hedge fund performance, and highlights important issues such as serial correlation, return smoothing, and illiquidity."
― Markus K. Brunnermeier, Princeton University