Optimal Allocation to Hedge Funds : An Empirical Analysis

  title={Optimal Allocation to Hedge Funds : An Empirical Analysis},
  author={Jaksa Cvitanic and Ali Lazrak and Lionel Martellini and Fernando Zapatero},
What percentage of their portfolio should investors allocate to hedge funds? The only available answers to the above question are set in a static mean-variance framework, with no explicit accounting for uncertainty on the active manager’s ability to generate abnormal return, and usually generate unreasonably high allocations to hedge funds. In this paper, we apply the model introduced in Cvitaníc, Lazrak, Martellini and Zapatero (2002b) for optimal investment strategies in the presence of… CONTINUE READING

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