The latest in Academic Hedge Fund Research

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1 24-25 January, PARIS 5 th Annual Hedge Fund Research Conference The latest in Academic Hedge Fund Research NYSE Euronext, 39 rue Cambon, Paris Conflicts of Interest Confronting the Asset Management Industry Do Hedge Fund Managers and Investors have Compatible Interest? Flagships versus non-flagship funds performance Costs and advantage of separate managed accounts The Role of Hedge Funds in Financial Markets Bad Guys or Good Guys? Hedge Funds corporate governance role Hedge Funds and asset mispricing Fund Performance Evaluation Can we Trust Historical Returns? Economic value of manipulation-proof performance measures Robust identification of hedge funds alphas and betas Hard to observe mega hedge fund management firms performance High-Frequency Traders Is speed their only advantage? Do High Frequency Traders trade faster and more accurately than other investors? Role of high frequency traders in price discovery and price efficiency

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3 Welcome to the 5th Annual Hedge Fund Research Conference, which presents the latest research papers about Hedge Funds, from the most renowned academics. With close than a hundred of submissions from 50 universities in 15 countries; the 15 unpublished papers which will be presented during the conference were selected following a thorough screening process by a committee of internationally respected academic professors. 4 years since inception, this event has become a reference in the field of risk management and alternative investments research, now attracting the most reputable academics working on cutting-hedge topics. Over the last 4 years, the Annual Hedge Fund Research Conference has thus been a platform for international visibility. Indeed, out of a total of 62 research papers presented across the last 4 events, 23 of them have already been published in the most renowned academic publications. Organizing Committee Serge Darolles, Université Paris Dauphine & CREST Serge Darolles is Professor of Finance at Université Paris Dauphine where he teaches Financial Econometrics since Prior to joining Dauphine, he worked for Lyxor between 2000 and 2012, where he developed mathematical models for various investment strategies. He also held consultant roles at Caisse des Dépôts & Consignations, Banque Paribas and the French Atomic Energy Agency. Mr. Darolles specializes in financial econometrics and has written numerous articles which have been published in academic journals. He holds a Ph.D. in Applied Mathematics from the University of Toulouse and a postgraduate degree from ENSAE, Paris. René Garcia, Edhec Business School After his Ph.D. in Economics from Princeton University in 1992, René Garcia joined the Université de Montréal, where he held the Hydro-Québec Chair in Risk Management. He was also the scientific director of the Centre for Interuniversity Research and Analysis on Organizations (CIRANO). He joined EDHEC Business School in Nice (France) in 2007 where he is today Chair Professor of Finance. His most recent research focuses on the evaluation of asset pricing models accounting for higher moments, long-run asset pricing models, the use of cross-sectional variance of equity returns to measure idiosyncratic volatility, the analysis of hedge fund returns. Christian Gouriéroux, Toronto University & CREST Christian Gouriéroux is professor of Economics at the University of Toronto and director of the Finance-Insurance laboratory at CREST (Center for Research in Economics and Statistics in Paris). His current research interests are in Financial Econometrics, especially in credit risk, term structure of interest rates, longevity, hedge funds and regulation. Christian has been a scientific adviser for credit scoring at BnpParibas during 20 years, and consultant for Basel II at DEXIA and CIBC (Canada). He has published widely, about 200 articles, in Economics, Econometrics and Finance academic journals. Scientific Committee Serge Darolles, Université Paris Dauphine & CREST Laurent Fournier, NYSE Euronext René Garcia, Edhec Business School Christian Gouriéroux, Toronto University & CREST Andrew Patton, Duke University Tarun Ramadorai, University of Oxford Thierry Roncalli, Lyxor Asset Management Ronnie Sadka, Boston College Laurent Tison, Lyxor Asset Management Laurent Tison joined Lyxor Asset Management in 2011, as Global Head of Marketing & Communications. Laurent started his career heading the marketing and development for the French subsidiary of a Swiss private bank during 6 years. He then joined SG Asset Management in 1997 and was named Managing Director of the Irish subsidiary and the SG Russell Asset Management joint venture in April In September 2000, Laurent was appointed Head of Corporate Communications for SG Asset Management in Paris. In 2005, Laurent moved to Hong Kong to head Communications for SG CIB Asia Pacific, and was also in charge of SG transversal communication projects in the region. Laurent holds a Master in Management Sciences and a Doctorate in Marketing from La Sorbonne university in Paris. 3 >>

4 DAY ONE Conflicts of Interest in Hedge Funds, Recent Industry Trends & High-Frequency Traders The first session sheds light on two agency problems confronting the asset management industry. Melvyn Teo finds that hedge fund firms have strong incentives to launch multiple funds to leverage on the performance of their first funds or flagships. In average, non-flagship funds underperform flagship funds by up to 3.48 percent per year. Charles Cao uses the Lyxor dataset of separate account returns to examine costs and advantage of a higher level of liquidity/ transparency. He estimates from these data that 23% of reported hedge fund autocorrelation is due to manager-discretion in return reporting. The second session starts with the David Hsieh s research about mega hedge fund management companies. Using data from those firms that do not report to commercial databases, he finds that the main differences between reporting and non-reporting firm come from different exposures to credit markets. Vikas Agarwal reports large investors preference to invest directly to Hedge Funds instead of using intermediated channels. Moreover, direct and early-stage investments tend to perform better than indirect ones, due in particular to the underperformance of fund of funds. The third session deals with the relations between Hedge Funds and Institutional Investors. Chotibhak Jotikasthira highlights that hedge fund activists achieve substantial improvement in the performance and governance of target firms by accumulating their holdings when other institutions sell shares. Yong Chen studies the role of hedge funds in the price formation process. His findings suggest that hedge funds play a role in reducing asset mispricing by holding stocks with large deviations from model values in the cross section. This particularity is not observed in general for other institutional investors. Finally, for the NYSE session, high frequency trading will be the sujet du jour. Two papers are presented in this session. In News trading and Speed, Thierry Foucault analyses the behavior of informed traders, and in particular their capacity to trade on public information more accurately and faster than other investors. The effects of high frequency traders on liquidity, volatility, price discovery are in particular analyzed. Terence Hendershott follows the same route and analyses the role of these high frequency traders in price discovery and price efficiency. He finds that these traders facilitate price efficiency by trading in the direction of permanent price changes. 4 >>

5 DAY TWO Fund Performance Evaluation, Long-Run Investors & High-Frequency Traders The second day will start with a session on Hedge Fund performance evaluation. Robert Kosowski proposes the first comprehensive analysis of the economic value of manipulation-proof performance measures. He proposes a novel way to incorporate macroeconomic information into the estimation of these manipulation-proof performance measures. The presentation finishes with a new way to rank funds with good out-of-sample performance for investors. Fabio Trojani presents a new method allowing a robust identification of hedge funds alphas and betas. This approach is used to detect funds featuring persistent outof-sample performance, especially in turbulent markets periods. In the second session, Gilles Chemla shows that sponsor firm characteristics are important determinants of corporate defined benefit plans. Performance of plans with biased portfolios lags significantly the performance of average plans. This result is consistent with a familiarity bias where pension managers are overconfident about familiar assets. Ronnie Sadka studies the pricing of commonly used systematic risk factors across long term investment horizons. Liquidity risk is only priced over short horizons up to six months, while market risk market risk is priced over longer horizons. Finally, in the last session of the day, Alejandro Bernales proposes a model including slow and fast traders. He finds that high frequency trading improves market quality but intensifies systemic risk and negatively affects the welfare of slow traders. Cancelation fee is in this framework a solution to decrease bid-ask spreads, improve informational efficiency and decrease market volatility. Sunil Wahal analyses the links between changes in the supply curves and the behavior of stock prices. At the aggregate level, High frequency trading does not affect prices in a wrong way. 5 >>

6 DAY ONE Conflicts of Interest in Hedge Funds, Recent Industry Trends & High-Frequency Traders Registration Conflicts of Interest in Hedge Funds Chair: C. Gouriéroux (University of Toronto) Growing the Asset Management Franchise: Evidence from Hedge Fund Firms Authors B. Fung (London School of Business) D. Hsieh (Duke University) N. Naik (London School of Business) M. Teo (Singapore Management University) Speaker: M. Teo (Singapore Management University) Discussant: J. Joenväärä (Imperial College and University of Oulu) We explore the capital raising activities of hedge fund firms. We find that hedge fund firms have strong incentives to launch multiple funds so as to circumvent fund level capacity constraints and take advantage of the non-netting of incentive fees across funds. They do so principally by leveraging on the performance of their first funds or flagships. Firms with successful flagships are able to raise follow-on funds that charge higher fees, set more onerous redemption terms, and attract greater inflows. Such capital raising activities are detrimental to fund investors. Non-flagship funds conceived by fund families underperform flagship funds by up to 3.48 percent per year after adjusting for co-variation with the Fung and Hsieh (2004) factors. Consequently, firms that have launched many funds significantly underperform single fund firms. Despite the underperformance of these multiple product firms, they generate greater fee revenues for their management companies than do single product firms, even after controlling for firm assets under management. These results shed light on the agency problems confronting the asset management industry. Liquidity Costs, Return Smoothing, and Investor Flows: Evidence from a Separate Account Platform Authors G. Farnsworth (Pennsylvania State University) B. Liang (University of Massachusetts) C. Cao (Pennsylvania State University) Speaker: C. Cao (Pennsylvania State University) Discussant: S. Darolles (Université Paris Dauphine) Using a new dataset of hedge fund returns from separate accounts on the Lyxor platform, we examine the costs and advantages of the greater liquidity of the Lyxor platform verses those of the associated main funds. Lyxor accounts are traded pari passu with the main fund but provide superior liquidity, third-party reporting, and low funding requirements. Overall, the greater liquidity of the separate account platform reduces the performance of Lyxor accounts by 2.82% annually relative to the associated main hedge fund. The fact that returns are calculated by a third party allows us to estimate the manager-discretion portion of hedge fund return smoothing. We estimate that 23.3% of reported (non-lyxor) hedge fund autocorrelation is due to manager discretion in return reporting. We also find that investors on the Lyxor platform utilize the ease of liquidation and investment on the platform to chase monthly performance, while no strong performance chasing takes place among the associated main funds. 6 >>

7 Morning break Recent Industry Trend Chair: R. Sadka (Boston University) Exploring Uncharted Territories of the Hedge Fund Industry: Empirical Characteristics of Mega Hedge Fund Firms Authors D. Edelman (Alternative Investment Solutions) W. Fung (London School of Business) D. Hsieh (Duke University) Speaker: D. Hsieh (Duke University Discussant: M. Briere (Amundi) This paper investigates mega hedge fund management companies that manage over 50% of the industry s assets, incorporating previously unavailable data from those that do not report to commercial databases. We document similarities among mega firms that report performance to commercial databases compared to those that do not. We show that the largest divergences between the performance reporting and non-reporting can be traced to differential exposure to credit markets. Thus the performance of hard-to-observe mega firms can be inferred from observable data. This conclusion is robust to delisting bias and the presence of serially correlated returns. Institutional Investment and Intermediation in the Hedge Fund Industry Authors V. Agarwal (Georgia State University) V. Nanda (Georgia Institute of Technology) S. Ray (University of Florida) Speaker: S. Ray (University of Florida) Discussant: G. Mero (Université de Cergy-Pontoise) Using new data on the hedge fund investments of institutional investors, this paper is the first to examine the determinants and consequences of investment preferences including intermediation and early-stage investing associated with institutional investment in the hedge fund industry. Our empirical analysis reveals several findings that are consistent with the predictions from the theoretical literature on intermediation. First, we find that larger investors are more likely to invest directly with hedge funds instead of using intermediated channels, and prefer early-stage investing in emerging funds and spinoffs. Second, institutions investing directly tend to perform better on a risk-adjusted basis. The underperformance of institutions using intermediation is mainly driven by their use of funds of hedge funds while investment consultants do not seem to either benefit or adversely affect the performance. Third, institutions engaging in early-stage investing exhibit better risk-adjusted performance. Taken together, these findings are consistent with an equilibrium where larger institutions enjoy economies of scale in their direct investments as well as access to emerging managers while smaller institutions rely on intermediation which is costlier but perhaps less than investing directly. 7 >>

8 DAY ONE Conflicts of Interest in Hedge Funds, Recent Industry Trends & High-Frequency Traders Lunch break The Role of Hedge Funds in Financial Markets Chair: A. Monfort (University of Maastricht) Hedge Fund Activists: Do They Take Cue from Institutional Exit? Authors N. Gantchev (UNC Chapel Hill) C. Jotikasthira (UNC Chapel Hill) Speaker: C. Jotikasthira (UNC Chapel Hill) Discussant: G. Ozik (EDHEC Business School) Hedge fund activists achieve substantial improvements in the performance and governance of target firms. These activists accumulate most of their holdings in the sixty days before a campaign when other institutions heavily sell target shares. Does institutional exit facilitate the emergence of value-enhancing activists? The answer is yes. First, at the daily frequency, we identify a strong positive relationship between institutional selling and the activist s purchases. Second, we find that institutional trading is driven by a few investors whose disproportionate selling of non-target stocks suggests that their trades are liquidity motivated. Third, we instrument an institution s daily trading in the target by its trading in non-target stocks and establish a causal link between institutional sales and hedge fund purchases. Institutional selling lowers prices and increases turnover, creating favorable market conditions for an activist to acquire a block of target shares. Our results show that even non-informational institutional exit plays an important corporate governance role by significantly raising the odds of activist interventions. The Role of Hedge Funds in the Security Price Formation Process Authors C. Cao (Pennsylvania State University) W. Goetzmann (Yale School of Management) B.Liang (University of Massachusetts) Y. Chen (Texas A&M University) Speaker: Y. Chen (Texas A&M University) Discussant: R. Garcia (EDHEC Business School) We present evidence on the role of hedge funds in the price formation process by using data on hedge fund equity ownership. Compared to other institutional investors, hedge funds tend to hold stocks that plot above the security market plane and stocks with larger deviations from model values in the cross-section. Focusing on the set of stocks plotting above the security market plane, we find that an increase of hedge fund ownership is significantly related to subsequent reduction in the stock s deviation from model values. Overall, these findings suggest that hedge funds play a role in reducing asset mispricing. 8 >>

9 Afternoon break High-Frequency Trading I Chair: L. Fournier (NYSE Euronext) News Trading and Speed Authors J. Hombert (HEC Paris) I.Rosu (HEC Paris) T. Foucault (HEC Paris) Speaker: T. Foucault (HEC Paris) Discussant: O. Guéant (Université Paris VII) Informed trading can take two forms: (i) trading on more accurate information or (ii) trading on public information faster than other investors. The latter is increasingly important due to technological advances. To disentangle the effects of accuracy and speed, we derive the optimal dynamic trading strategy of an informed investor when he reacts to news (i) at the same speed or (ii) faster than other market participants, holding information precision constant. With a speed advantage, the informed investor s order flow is much more volatile, accounts for a much bigger fraction of trading volume, and forecasts very short run price changes. We use the model to analyze the effects of high frequency traders on news (HFTNs) on liquidity, volatility, price discovery and provide empirical predictions about the determinants of their activity. High Frequency Trading and Price Discovery Authors J. Brogaard (University of Washington) R. Riordan (University of Ontario Institute of Technology) T. Hendershott (University of California at Berkeley) Speaker: T. Hendershott (University of California at Berkeley) Discussant: C.-A. Lehalle (Cheuvreux) We examine the role of high-frequency traders (HFT) in price discovery and price efficiency. Overall HFT facilitate price efficiency by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors on average days and the highest volatility days. This is done through their marketable orders. In contrast, HFT liquidity-supplying non-marketable orders are adversely selected in terms of the permanent and transitory components as these trades are in the direction opposite to permanent price changes and in the same direction as transitory pricing errors. HFT predicts price changes in the overall market over short horizons measured in seconds. HFT is correlated with public information, such as macro news announcements, market- wide price movements, and limit order book imbalances Keynote Address Sovereign Risk, Bank Balance Sheets, and Eurozone Contagion A. Beltratti, Chairman of the Management Board of Intesa Sanpaolo and Professor, University Bocconi, Milano 9 >>

10 DAY TWO Fund Performance Evaluation, Long-Run Investors & High-Frequency Traders Fund Performance Evaluation Chair: S. Darolles (Université Paris Dauphine) The Economic Value and Statistical Properties of Manipulation-proof Performance Measures Authors J. Joenväärä (University of Oulu) J. Klemelä (University of Oulu) R. Kosowski (Imperial College London) Speaker: R. Kosowski (Imperial College London) Discussant: M. Billio (University of Venice) Recent research on portfolio performance measures that are less prone to manipulation often appeals to non-normalities in hedge fund returns for motivation, but no comprehensive analysis of the economic value of manipulation proof performance measures (MPPMs) for hedge fund selection exists. First, we contribute to this literature by analysing the economic value and statistical properties of MPPMs by hedge fund style in a large consolidated hedge fund database. Second, we build on the work by Goetzmann, Ingersoll, Spiegel, and Welchis (2007) by proposing a novel non-parametric way to incorporate macroeconomic information into the estimation of a conditional version of their unconditional MPPM. We show that kernel regressions provide more accurate estimates of MPPMs than standard linear regressions especially during the extreme macroeconomic conditions. Finally, we find that using our conditional version of the MPPM to rank funds delivers superior out-of-the-sample riskadjusted performance for investors than the standard unconditional MPPM. Robust Hedge Fund Exposures and Alphas Authors L. Camponovo (University of St. Gallen) A. Popescu (University of Lugano) F. Trojani (University of Lugano) Speaker: F. Trojanii (University of Lugano) Discussant: C. Gouriéroux (Toronto University) We introduce a new general method allowing a more robust identification of hedge fund performances and risk exposures in large cross-sections of funds. Based on a robust bootstrap approach, we obtain procedures featuring a good degree of resistance to unfrequent anomalous data features, thus ensuring a better control of false discoveries and an improved power in multiple testing procedures attempting to identify the subset of performing funds. In a broad dataset of hedge funds, our method identifies a large subset of funds featuring persistent out-of sample performance, as well as more stable hedge fund exposures and lower maximal drawdowns. In contrast, conventional approaches tend to find very few performing funds, especially in turbulent market periods, having a weak performance persistence, unstable factor exposures and larger drawdowns. 10 >>

11 Morning break Long-Run Investors Chair: R. Garcia (EDHEC Business School) Familiarity Breeds Alternative Investment: Evidence from Corporate Defined Benefit Pensions Plans Authors C. Atanasova (Simon Fraser University) G. Chemla (Imperial College London & CNRS-DRM) Speaker: G. Chemla (Imperial College London & CNRS-DRM) Discussant: S. Sender (Edhec Risk Institute) We show that sponsor firm characteristics are important determinants of corporate defined benefit pension plan alternative investments. Specifically, pension plans whose sponsors engage in innovation invest more in private equity and venture capital. In addition, pension plan real estate and mortgage investments are associated with sponsor high real estate holdings. The effect of these sponsor s characteristics extends not only to the likelihood of investing but also to the amount of funds allocated to these two alternative asset classes. We do not find evidence consistent with risk shifting, hedging or diversification rationale for this investment bias. In addition, our results appear to be inconsistent with the information advantage hypothesis as we find that the performance of plans with biased portfolios lags significantly the performance of the average plan in our sample. We address the endogeneity of the decision to invest in alternative asset classes i) by controlling for observable determinants, and ii) by examining the investment behavior of pension plans before and after their sponsors start and stop investing in R and D and in real estate. We address the endogeneity of the return to innovation and real estate prices by using financial constraints as an instrument. Overall, our results are consistent with a familiarity bias where pension managers are over-confident about familiar assets. Horizon Pricing Authors A. Kamara (University of Washington) R. Korajczyk (Northwestern University) X. Lou (University of Delaware) R. Sadka (Boston College) Speaker: R. Sadka (Boston College) Discussant: R. Savona (University of Brescia) This paper studies the pricing of commonly used systematic risk factors across investment horizons of up to five years. In a classical one-period asset-pricing model, high expected returns are achieved only by accepting high levels of systematic risk. However, allowing for heterogeneous investment horizons across investors, some risks that are important to investors over a particular horizon may seem less consequential to investors facing a different investment horizon. We find that liquidity risk is priced over short horizons of up to six months while market risk is priced over intermediate horizons of up to a year. Value/growth is priced as a non-risk-based characteristic at short horizons, while it shows properties of both a risk factor and a characteristic at long horizons. Size and momentum are priced as characteristics rather than risk factors at all horizons. The results highlight the importance of considering investment horizon in determining whether a crosssectional return spread is alpha or a premium for systematic risk. 11 >>

12 DAY TWO Fund Performance Evaluation, Long-Run Investors & High-Frequency Traders Lunch break 14:00 15:30 High-Frequency Trading II Chair: R. Garcia (EDHEC Business School) How Fast Can You Read Books? High Frequency Trading in Dynamic Limit Order Book Markets Authors A. Bernales (Banque de France) Speaker: A. Bernales (Banque de France) Discussant: L. Lescourret (ESSEC Business School) We consider a dynamic equilibrium model of high frequency trading (HFT) with two types of agents, fast and slow traders, characterized as a stochastic sequential game in a limit order market. Fast traders have superior speed in term of: trading submissions; analysing information; and revisions of previous decisions. Nevertheless, slow traders can observe and learn the information disclosed by the trading activity from fast traders. We find that the welfare of slow traders is higher when there are fast traders in the market than when fast traders are not present. This is due to the learning process of slow traders that improves the overall market informational efficiency. In addition, we find that HFT improves market quality by increasing liquidity and reducing the microstructure noise. High Frequency Quotation, Trading, and the Efficiency of Prices Authors J. Conrad (UNC Chapel Hill) J. Xiang (Arizona State University) S. Wahal (Arizona State University) Speaker: S. Wahal (Arizona State University) Discussant: G. Le Fol (Université Paris Dauphine and CREST) We investigate the relation between high frequency changes in the supply curve and the behavior of stock prices using variance ratios of 15 second and 5 minute returns based on transaction prices and quote mid-points. There is little evidence that rapid changes in the supply curve generated by quotation activity and/ or high frequency trading affects variance ratios in small or large capitalization stocks. Stocks that experience large intraday increases in quotation activity also do not experience degradation in variance ratios. Changes in make-take fees that reduce the cost of trading result in modest improvements in variance ratios. At an aggregate level, the evidence suggests that high frequency quotation or trading does not affect prices in a deleterious way the data point to a highly liquid market in which prices largely behave as a random walk. 12 >>

13 Keynote Speaker Andrea Beltratti, Chairman of the Management Board of Intesa Sanpaolo and Professor, University Bocconi, Milano He has been Full professor at the Luigi Bocconi University of Milano since 2003, where he currently teaches Financial Economics and Equity Portfolio Management. At that University he was Director of the Degree in Economics, Statistics and Social Sciences (CLE) and of the Degree in Economics and Social Sciences (DES) from 2000 to 2004 and Vice-Rector for the Undergraduate Department from 2004 to From 1997 to 2010 he was Scientific Coordinator of Foundation BSI- Gamma in Lugano. From 2001 to 2005 he was a member of the School Council of Ph.D in Economics at the Bocconi University and from 2005 to 2007 a member of the Commission for university and teaching legislation and for PhDs of the Società Italiana degli Economisti. He has been a member of the Editorial Board of Geneva Paper on Risk and Insurance - Issues and Practice since Andrea holds a Degree in Economics from the University of Torino in 1982 and a Ph.D in Economics from Yale University in >>

14 SPEAKERS Melvyn Teo, Professor of Finance, Singapore Management University Melvyn Teo is Professor of Finance and Associate Dean of Research at the Lee Kong Chian School of Business, Singapore Management University. He is also Director of the BNP Paribas Hedge Fund Centre at SMU. Melvyn s research spans hedge funds, institutional investors, and capital markets. His articles on these topics have appeared in top peer-reviewed finance journals including the Journal of Financial Economics and the Review of Financial Studies, and have garnered awards from the European Finance Association, Inquire, AIMA, and INSEAD. At SMU where he teaches finance and hedge funds in the MBA and PhD programs, he was conferred the Lee Foundation Fellowship and the Lee Kuan Yew Fellowship for Research Excellence. Melvyn has also taught or consulted for Fullerton Fund Management, Shinhan BNP Paribas Asset Management, Standard Chartered Bank, State Street Bank, The Government Investment Corporation of Singapore, and United Overseas Bank. Melvyn holds a B.A. in Economics and Mathematics from Cornell University and a Ph.D. in Economics from Harvard University. Charles Cao, Professor of Finance, Pennsylvania State University Charles Cao is The Smeal Chair Professor of Finance at the Department of Finance, the Smeal College of Business at the Pennsylvania State University. He received his Ph.D. in Finance from the University of Chicago s Graduate School of Business in 1993, M.S. from the University of Kentucky in 1988, and B.S. from Peking University in Professor Cao s research interests include derivative securities markets, market microstructure, credit risk, mutual funds and hedge funds. His research has been published in a wide range of academic journals, including Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Journal of Business, and Journal of Financial and Quantitative Analysis. His paper ``Price Discovery without Trading: Evidence from Nasdaq Pre-opening (co-authored with Eric Ghysels and Frank Hatheway) received the New York Stock Exchange Award for Best Paper on Equity Trading at Western Finance Association Meetings in >>

15 David Hsieh, Professor, Duke University David A. Hsieh is the Bank of America Professor of Finance at the Fuqua School of Business, Duke University. He is a member of the finance area. Professor Hsieh received a B.Sc. from Yale University in 1976 for a double major in Economics and Mathematics, and a Ph.D. in Economics from the Massachusetts Institute of Technology in He taught at the Graduate School of Business, University of Chicago from 1981 to 1989, after which he joined the Fuqua faculty in He holds a secondary appointment in the Duke Economics Department. Professor Hsieh s research interest is in financial risk management. His current research focuses on the risk and return of hedge funds, with articles appearing in the Review of Financial Studies, Journal of Portfolio Management, Journal of Fixed Income, and Financial Analyst Journal. He has presented his research on hedge funds to the Federal Reserve, the International Monetary Fund, the Bank for International Settlements, the Commodities Futures Trading Commission, in addition to academic audiences at universities and conferences. He appeared before the Securities and Exchange Commission in the May 2003 Hedge Fund Roundtable. His earlier work was in statistical modeling of high frequency financial data, especially volatility clustering in stocks, bonds, and currencies. Sugata Ray is an Assistant Professor of Finance at the University of Florida. He received his PhD from the Wharton School at the University of Pennsylvania. His research interests include hedge funds and market microstructure. Prior to joining the finance department at the University of Florida, he worked as a consultant for financial institutions with Oliver Wyman. Sugata Ray, Assistant Professor of Finance, University of Florida 15 >>

16 SPEAKERS Chotibhak (Pab) Jotikasthira is an Assistant Professor of Finance at the Kenan- Flagler Business School at the University of North Carolina at Chapel Hill. His research interests include empirical asset pricing and market microstructure, with a particular focus on trading behaviors of institutional investors and their impact on asset prices. His research has been published in the Journal of Finance and Journal of Financial Economics. Jotikasthira received his PhD in finance from Indiana University in Prior to starting his doctoral coursework, he worked as a portfolio and risk manager for the Bank of Thailand, where he managed $38 billion in foreign-exchange reserves invested in global fixed-income markets and developed quantitative models for formulating investment strategies. Chotibhak Jotikasthira, Assistant Professor of Finance, UNC Chapel Hill Yong Chen, Assistant Professor of Finance, Texas A&M University Yong Chen is an Assistant Professor of Finance and Republic Bank Research Fellow at the Mays Business School at Texas A&M University. Prior to joining Mays in 2012, Dr. Chen was an Assistant Professor of Finance at the Pamplin College of Business at Virginia Tech. Dr. Chen has taught investments, equity markets, portfolio management, empirical asset pricing at the undergraduate, MBA, and doctoral levels. Dr. Chen s research interests focus on investments with a special emphasis on hedge funds and mutual funds. His research has been published in the Journal of Financial Economics, Journal of Financial and Quantitative Analysis, and Journal of Investment Management, as well as presented at numerous university workshops, academic conferences (such as the American Finance Association, the Western Finance Association, and the European Finance Association meetings), financial policymakers (such as the Federal Reserve Bank of New York), and private hedge funds. 16 >>

17 Thierry Foucault, Professor of Finance, HEC Paris Thierry Foucault received his Ph.D in Finance in He is a research fellow of the Centre for Economic Policy (CEPR) and a member of GREGHEC (CNRS). He has taught in various institutions such as Carnegie Mellon University (USA), the Nordic Finance Network, Oxford (Said Business School), Pompeu Fabra University (Spain), the Studienzentrum Gerzensee (Switzerland), and the Tinbergen Institute (Netherlands). His research focuses on the determinants of financial markets liquidity and the industrial organization of the securities industry. His work is published in top-tier scientific journals such as the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies or the Rand Journal of Economics. He serves on the scientific committees of the Autorité des Marchés Financiers and the ESMA. He is co-editor of the Review of Finance, Associate Editor of the Journal of Finance and the Review of Asset Pricing Studies. He received awards for his research from the Europlace Institute of Finance in 2005 and 2000, the Foundation HEC in 2006 and 2009, and The Analysis Group Award for the Best Paper on Financial Markets and Institutions at the Western Finance Association Meetings on Terrence Hendershott completed his Ph.D. at the Graduate School of Business at Stanford University and currently holds the Cheryl and Christian Valentine Chair at the Haas School of Business at the University of California at Berkeley. His research interests include information technology s impact and role in financial markets, short-run asset price dynamics, and the structure and regulation of financial markets. His writing has appeared in national newspapers and magazines and his academic work has been published in numerous scholarly journals. He has consulted for various financial markets and investment firms. Terrence Hendershott, Associate Professor of Finance, University of California at Berkeley 17 >>

18 SPEAKERS Robert Kosowski, Associate Professor, Imperial College London Robert Kosowski is Associate Professor in the Finance Group of Imperial College Business School, Imperial College London, and Director of the Risk Management Lab and Centre for Hedge Fund Research. Robert is an associate member of the Oxford-Man Institute of Quantitative Finance at Oxford University and a member of AIMA s research committees. Robert Kosowski s research interests include asset pricing and financial econometrics with a focus on hedge funds, mutual funds, performance measurement, business cycles and derivative trading strategies. Robert s research has been featured in The Financial Times and The Wall Street Journal and was awarded the European Finance Association 2007 Best Paper Award, an INQUIRE UK 2008 best paper award, an INQUIRE Europe 2009 best paper award and the British Academy s mid-career fellowship ( ). Robert s research has been accepted for publication in top peer-reviewed finance journals such as The Journal of Finance, The Journal of Financial Economics and the Journal of Financial and Quantitative Analysis. Fabio Trojani is a full professor of Statistics at the University of Lugano (USI) since January 2009 and a Research Fellow of the Swiss Finance Institute. He is a visiting professor of finance at the University of Geneva and at Bocconi University, Milan. Before joining USI, he was a full professor of Finance at the University of St Gallen and a director of the Swiss Institute of Banking and Finance. Professor Trojani holds a PhD in Econometrics and Finance from the University of Zurich and is the head of the NCCR-FINRISK project of the Swiss National Science Foundation New Methods in Theoretical and Empirical Asset Pricing. He has published widely in leading journals in the areas of Finance, Econometrics, and Statistics. Fabricio Trojani, Professor of Statistics, University of Lugano 18 >>

19 Gilles Chemla, Professor of Finance, Imperial College London & CNRS-DRM A native of France, Gilles obtained degrees in mathematics and engineering before working at Banque Nationale de Paris. He then completed a PhD at the London School of Economics in Since then, he has been an Assistant Professor of Finance, then a Honorary Associate Professor, at the Sauder School of Business at the University of British Columbia. He is also a research fellow at Centre National de la Recherche Scientifique and at Centre for Economic Policy Research and a member of the program committee at European Finance Association. Gilles research interests include corporate finance, corporate governance, mergers and acquisitions, private equity and venture capital, capital budgeting, capital structure, corporate risk management, security design and securitization, industrial organization, energy markets and sustainable development, asset allocation, pension funds, and managerial economics. Ronnie Sadka, Professor of Finance, Boston College Dr. Ronnie Sadka is Professor of Finance and the Hillenbrand Distinguished Fellow at Boston College s Carroll School of Management. Professor Sadka s research focuses on liquidity in financial markets and stock-price modeling. He has developed unique measures of market liquidity and has demonstrated their importance for understanding the profitability of different trading strategies as well as hedge-fund performance. His research also uncovers distinct periodic patterns of stock returns both over the calendar year and during a single trading day. Sadka s work has appeared in various outlets including the Journal of Finance, the Journal of Financial Economics, and Financial Analysts Journal, and has been covered by The New York Times, The Wall Street Journal, and CNBC. Prior academic experience includes teaching at the University of Chicago (Booth), New York University (Stern), Northwestern University (Kellogg), and the University of Washington (Foster). Industry experience includes Goldman Sachs Asset Management and Lehman Brothers (quantitative strategies). Professor Sadka earned a B.Sc. (Magna Cum Laude) in industrial engineering and a M.Sc. (Summa Cum Laude) in operations research, both from Tel-Aviv University. He received a Ph.D. in finance from Northwestern University (Kellogg). 19 >>

20 SPEAKERS Alejandro Bernales, Research Economist, Banque de France Alejandro Bernales is currently Research Economist at Banque de France (Financial Economics Research Division) and Adjunct Professor of Finance at ESSEC Business School. His research includes studies about market microstructure, high frequency trading, asset pricing, derivatives markets, equilibrium models with learning, and asymmetric information. His previous positions have been as researcher at the Inter-American Development Bank (Washington-DC) and at the Central Bank of Chile (Chile); he was also a Marie Curie Fellow for the European Commission. He has been invited to present his research in several seminars around the world including universities and central banks such as the Federal Reserve Board, University of Rotterdam, University of Melbourne, among others. Alejandro has a PhD in Finance from the Manchester Business School, University of Manchester in United Kingdom. Sunil Wahal, Professor of Finance, Arizona State University Dr. Sunil Wahal is the Jack D. Furst Professor of Finance at ASU W. P. Carey School of Business. Before joining the ASU faculty in 2005, Dr. Wahal was an associate professor at Emory University for 8 years. Dr. Wahal recently returned to ASU from work with Dimensional Fund Advisors. He received his Ph.D. in finance from University of North Carolina, Chapel Hill in Dr. Wahal also has an MBA from Wake Forest University and received his undergraduate degree in finance in India at the University of Delhi. Dr. Wahal is the recipient of a Q Group Research Award. His research is focused on institutional trading (market micro structure), delegated portfolio management, trading strategies, and corporate finance. Dr. Wahal has published work in numerous prestigious scholarly journals including the Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Financial Management, and the Journal of Business. Dr. Wahal has presented and participated in discussions at more than 50 conferences worldwide. As a professor in the Department of Finance at ASU, Dr. Wahal teaches applied financial management, corporate finance, entrepreneurial finance, and private equity at both the graduate and undergraduate level. He is also an active member in the American Finance Association, Financial Management Association, and the Society for Financial Studies. 20 >>

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22 2012 conference research papers Paper Presented by From Title R. Sadka Boston College Skin in the Game versus Skimming the Games: Governance, Share Restrictions and Insider Flow G. Aragon Arizona State University Strategic Delays and Clustering in Hedge Fund Reported Returns G. Girardi Suffolk University Systemic Risk Measurement: Multivariate GARCH Estimation of CoVaR C. Brownlees Universitat Pompeu Fabra Volatility, Correlation and Tails for Systemic Risk Management C. Gouriéroux University of Toronto Allocating Systematic and Unsystematic Risks in a Regular Perspective M. Lambert Maastricht University Higher-moment Risk Exposures in Hedge Funds M. Cliff Analysis Group Hedge Funds, The Good, the (Not-so) Bad, and the Ugly J. Jurek Princeton University The Cost of Capital for Alternative Investments E. Pagnotta New York University Competing on Speed D. Rosenthal University of Illinois at Chicago Performance Metrics for Algorithmic Traders L. Wagalath Paris 6 University Running for the Exit: Distressed Selling and Endogenous Correlation in Financial Markets G. Le Fol Paris Dauphine University Liquidity Contagion: a Look at emerging Markets F. Franzoni University of Lugano ETFs, Arbitrage and Shock Propagation Z. Shi Georgia State University The Impact of Portfolio Disclosure on Hedge Fund Performance, Fees, and Flows T. Ramadorai University of Oxford The Reliability of Voluntary Disclosures: Evidence from Hedge Funds G. Simon Capital Fund Management Does Lockup Increase Hedge Funds Lifetimes? E. Kastl Cass Business School How Does Family Membership Influence Hedge Fund Survival? J. Joenvaara University of Oulu Revisiting Stylized Facts about Hedge Funds I. Guidotti University of Neufchatel Rational Behavior of Hedge Fund Managers and Investors 2011 conference research papers Paper Presented by From Title T. Adrian Federal Reserve Bank of New York Broker-Dealer Leverage and the Cross-Section of Stock Returns A. Ang Columbia University Hedge Fund Leverage A. Landier Toulouse School of Economics Do Hedge Funds Manipulate Stock Prices? T. Ramadorai University of Oxford Capacity Constraints, Investor Information, and Hedge Fund Returns A. Menkveld VU University Middlemen in Limit-Order Markets R. Sadka Boston College Do Hedge Funs Reduce Idiosyncratic Risk? G. Ozik Edhec Business School Media Coverage and Hedge-Fund Returns M. Teo Singapore Management University Hedge Funds and Analyst Conflicts of Interests N. Bollen Vanderbilt University Zero-R2 Hedge Funds and Market Neutrality V. Nanda Georgia Tech University Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake C. Gouriéroux University of Toronto Survival of Hedge Funds: Frailty vs Contagion M. Billio University of Venice Crises and Fund of Hedge Funds Tail Risk G. Criton Lombard Odier Unsupervised Risk Factor Clustering: a Construction Framework for Funds of Hedge Funds C. Cao Penn State University Can Hedge Funds Time Market Liquidity? H. Hau University of Geneva Role of Equity Funds in the Financial Crisis M. Gianetti Stockholm School of Economics Investors Horizons and the Amplification of Market Shocks 22 >>

23 2010 Conference research papers Paper Presented by From Title G. Plantin Toulouse School of Economics Rewarding Trading Skills without Inducing Gambling? C. Gouriéroux University of Toronto The Effects of Management and Provision Accounts on Hedge Funds Returns V. Fos Columbia University Inferring Reporting-related Biases in Hedge Fund Databases from Hedge Fund Equity Holdings M. Billio University of Venice Econometric Measures of Connectedness and Systemic Risk in the Finance and Insurance Sectors B. Buyuksahin International Energy Agency Speculators, Commodities and Cross Market Linkages C. Polk London School of Economics Connected Stocks M. Teo Singapore Management University The Liquidity Risk of Liquid Hedge Funds R. Sadka Boston College Liquidity Risk and the Cross-Section of Hedge-Fund returns N. Papageorgiou HEC Montreal Performance Analysis of a Collateralized Fund Obligation (CFO) Equity Tranche R. Garcia Edhec Business School The Option CAPM and The Performance of Hedge Funds H. Hau University of Genova The Exchange Rate Effect of Multi-Currency Risk Arbitrage T. Ramadorai University of Oxford Asset Fire Sales and Purchases and the International Transmission of Funding Shocks F. Franzoni University of Lugano Hedge Fund Stock Trading in the Financial Crisis of R. Kosowski Imperial College London Hedge Fund Predictability Under the Magnifying Glass: Forecasting Individual Fund Returns Using Multiple Predictors A. Patton Duke University On the High Frequency Dynamics of Hedge Fund Risk Exposures 2009 conference research papers Paper Presented by From Title D. Madan University of Maryland Hedge Fund Performance: Source and Measures C. Gouriéroux University of Toronto L-Performance with an Application to Hedge Funds R. Garcia EDHEC Business School Empirical Likelihood Estimators for Stochastic Discount Factors J. Teiletche Lombard Odier The Dynamics of Hedge Funds Performances J.P. Florens Toulouse School of Economics Hedge Funds Durations: Endogeneity of Performance and AUM M. Billio University of Venice Dynamic Risk Exposure in Hedge Funds V. Agarwal Georgia State University Do Higher-Moment Equity Risks Explain Hedge Fund Returns? R. Kosowski Imperial College London Where There is nothing to Hide: Risks and the Cross-Section of Hedge Fund Returns R. Cont Columbia University When Diversification Increases Risks: Feedback Effects and Endogenous Correlation in Fund Returns A. Patton Duke University Time-Varying Liquidity in hedge Funds Returns N. Bollen Vanderbilt University Locked up by a Lockup: Valuing Liquidity as a Real Option D. Thesmar HEC Paris Limits of Limits of Arbitrage: Theory and Evidence 23 >> 23 >>

24 PUBLISHED PAPERS Authors Title Published in Aboul-Enein, S., Dionne, G. and N. Papageorgiou Agarwal, V., Fos, V., and W. Jiang Performance Analysis of a Collateralized Fund Obligation (CFO) Equity Tranche Inferring Reporting-related Biases in Hedge Fund Databases from Hedge Fund Equity Holdings The European Journal of Finance, forthcoming Management Science, forthcoming Ang, A., and N. Bollen Locked up by a Lockup: Valuing Liquidity as a Real Option Financial Management, 2010 Ang, A., Gorovyy, S., and G., van Inwegen Aragon, G., and V. Nanda Avramov, D., Barras, L., and R. Kosowski Ben-David I., Franzoni F., and R. Moussawi Ben-David I., Franzoni F., Landier A., and R. Moussawi Billio, M., Getmansky, M., Lo, A. and L. Pelizzon Billio, M., Getmanski, M., and L. Pelizzon Hedge Fund Leverage Journal of Financial Economics, 2011 Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake Hedge Fund Predictability Under the Magnifying Glass: Forecasting Individual Fund Returns Using Multiple Predictors Hedge Fund Stock Trading in the Financial Crisis of Do Hedge Funds Manipulate Stock Prices? Econometric Measures of Connectedness and Systemic Risk in the Finance and Insurance Sectors Review of Financial Studies, 2012 Journal of Financial and Quantitative Analysis, forthcoming The Review of Financial Studies, 2012 Journal of Finance, forthcoming Journal of Financial Economics, 2011 Dynamic Risk Exposure in Hedge Funds Computational Statistics and Data Analysis, 2012 Billio, M., Mamo, K., and L. Pelizzon Crises and Fund of Hedge Funds Tail Risk Funds of Hedge Funds: Managing in Turbulent Times (ed. G. Gregoriou), 2013 Bollen, N. Zero-R2 Hedge Funds and Market Neutrality Journal of Financial and Quantitative Analysis, forthcoming Cao, C., Chen, Y., Liang, B., and A. Lo Cont, R., and L. Wagalath Can Hedge Funds Time Market Liquidity? Running for the Exit: Distressed Selling and Endogenous Correlation in Financial Markets Journal of Financial Economics, forthcoming Mathematical Finance, 2012 Darolles, S., Jasiak, J. and C., Gouriéroux Diez de los Rios, A., and R. Garcia L-Performance with an Application to Hedge Funds Journal of Empirical Finance, 2009 The Option CAPM and The Performance of Hedge Funds Review of Derivatives Research, 2011 Eberlein, E., and D. Madan Jotikasthira, C., Lundblad, C., and T. Ramadorai Ozik, G., and R. Sadka Patton, A., and T. Ramadorai Hedge Fund Performance: Source and Measures Asset Fire Sales and Purchases and the International Transmission of Funding Shocks Media Coverage and Hedge-Fund Returns On the High-Frequency Dynamics of Hedge Fund Risk Exposures International Journal of Theoretical and Applied Finance, 2009 Journal of Finance, forthcoming Financial Analysts Journal, forthcoming Journal of Finance, forthcoming Sadka, R. Liquidity Risk and the Cross-Section of Hedge-Fund returns Journal of Financial Economics, 2010 Ramadorai, T. Capacity Constraints, Investor Information, and Hedge Fund Returns Journal of Financial Economics, forthcoming Teo, M. The Liquidity Risk of Liquid Hedge Funds Journal of Financial Economics, >>