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Two of the most cited papers are Sirri, E.R., Tufano, P., 1998. Costly Search and Mutual Fund Flows. Journal of Finance 53 (5). 1589–1622 and Chevalier, J., Ellison, G., 1997. Risk Taking by Mutual Funds as a Response to Incentives. Journal of Political Economy 105 (6). 1167–1200.


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Portfolio optimization techniques are used quite a bit by hedge funds. I think you misunderstand how portfolio optimization operates in the context of an active trading strategy. Your question suggests a view of portfolio optimization as a tool to adjust portfolio weights arrived at by a separate, active strategy. Under that approach, you are correct, the ...


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I work on Quant hedge fund. My answer is: YES and NO:) Advanced optimization techniques are popular in academia but less useful on the street. Specifically, the answer really depends on which type of strategies you are trading. For equities long-short portfolios, some level of optimization is needed, partly because they need to trade on large sizes on ...


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I think modelling hedge fund returns is a very interesting yet demanding task. Your model will have to strike a balance between the tangibility of the model on the one hand and the possibility of parameter estimation on the other. Plus I think you will encounter hedge funds that resist all modelling attempts because there strategies are just too elusive. ...


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My experience in statistical arbitrage desks (primarily equities) and CTAs is somehow different than @Simon's. From my perspective, I have used and seen plenty of portfolio optimization tools. However, I have most often operated in a layered architecture. A layered architecture is an architecture where independent automated traders are stacked, each and ...


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For hedge funds, the main factors that drive capital flows are (not sure about actual research papers) ... Risk-adjusted performance (over prior 4-6 years) is very strongly correlated to capital flows and by far the most dominant factor. Absolute return is mostly ignored, unless the absolute return is very low (i.e. sub 5%) and similarly leverage is mostly ...



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