I promise I will not use a mulligan when I launch any funds (SSRN Paper here).
This paper provides the first systematic analysis of performance patterns for emerging managers in the hedge fund industry. Emerging managers have particularly strong financial incentives to create investment performance and, because of their size, may be more nimble than established ones. Performance measurement, however, needs to control for the usual biases afflicting hedge fund databases. Backfill bias, in particular, is severe for this type of study. After adjusting for such biases and using a novel event time approach, we find strong evidence of outperformance during the first two to three years of existence. Controlling for size, each additional year of age decreases performance by 48 basis points, on average. Cross-sectionally, early performance by individual managers is quite persistent, with early strong performance lasting for up to five years.
Radiohead hosts online video contest. Maybe I should hold a cover design contest for my book?
“Why the Fed must act in unfamiliar ways” by El-Erian:
In intervening to stabilise the system as a whole, the authorities end up protecting certain people and institutions from the consequences of their ill-advised actions, thereby undermining the discipline that is crucial to market efficiency. As unpleasant as this is, the moral hazard risk is inevitable at this advanced stage of the crisis. Indeed, the question is not just what happens to irresponsible lenders and imprudent borrowers. It is also about the damage that is being inflicted on others as the financial system freezes.
If you have never been to the touring Banff Mountain Film Festival, I highly recommend it.
And another round of Really with Seth and Amy…