Lyxor Event Prog Final Hd

8/3/2019 Lyxor Event Prog Final Hd

1/20

4T H

A N N U A L H E D G E F U N DR E S E A R C H C O N F E R E N C E

THE LATE S T IN A CA DE MIC HE DGE FUND R E S E A R CH

N Y S E E U R O N E X T, 3 9 R U E C A M B O N , 7 5 0 0 1 P A R I S

2 6 - 2 7 J A N U A R Y, 2 0 1 2 - P A R I S

INFORMATION ASYMMETRY AND HEDGE FUND DISCLOSURE:

DO HEDGE FUND MANAGERS AND INVESTORS HAVE COMPATIBLE INTERESTS?

Potential conflicts of interest and information asymmetry between managers and their clientsDebates over the optimal hedge fund disclosure to investors and market regulators

Impact of portfolio disclosure on hedge fund performance, fees and flows

HEDGE FUND RISK PROFILE:

THE LATEST DEVELOPMENTS ON RISK-REWARD MEASUREMENT

New stylized facts about hedge fund returns

Conditional higher-moment asset-pricing model

Risk profile of the aggregate hedge fund universe

DEMYSTIFYING SYSTEMIC RISK AND MARKET CONTAGION:

THE REAL EFFECTS OF MARKET PARTICIPANTS AND FINANCIAL INSTRUMENTS

New measures of the contribution of financial entities to systemic risk

Feedback effects due to distressed selling and short selling

THE NEW DEAL OF HIGH FREQUENCY TRADING:

INCENTIVES VS EMBEDDED RISKS

Exchanges incentives to invest in faster trading technologies

Investors trading decisions

New performance metrics for algorithmic traders

B r o u g h t t o y o u b y


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4 T H A N N U A L H E D G E F U N D R E S E A R C H C O N F E R E N C E

ACADEMIC PARTNERS

BUSINESS PARTNERS


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ORGANIZING COMMITTEE

SERGE DAROLLES, LYXOR RESEARCH AND CRESTSerge Darolles joined Lyxor Research in 2000 and develops mathematical models for

various investment strategies. Prior to joining Lyxor Research, Mr. Darolles held consultant

roles at Caisse des Dpts & Consignations, Banque Paribas and the French Atomic

Energy Agency. Mr. Darolles specializes in mathematical finance and modelling and has

written numerous articles which have been published in academic journals. He is an

Adjunct Professor of Mathematics at Paris Dauphine University where he teaches Financial

Econometrics. Mr. Darolles holds a Ph.D. in Applied Mathematics from the University of Toulouse and a

postgraduate degree in Economics and Statistics at Ecole Nationale de la Statistique et de lAdministration

Economique, Paris.

REN GARCIA, EDHEC BUSINESS SCHOOLAfter his Ph.D. in Economics from Princeton University in 1992, Ren Garcia joined the

Universit de Montral, where he held the Hydro-Qubec Chair in Risk Management and

was a Research Fellow of the Bank of Canada. 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. He is currently editor of the Journal of Financial Econometrics, published by

Oxford University Press. His most recent research focuses on the evaluation of asset pricing modelsaccounting 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, and the funding liquidity

premium in bonds.

CHRISTIAN GOURIROUX, UNIVERSITY OF TORONTO AND CRESTChristian Gouriroux is professor of Economics at the University of Toronto, director of the

Finance-Insurance laboratory at CREST (Center for Research in Economics and Statistics

in Paris), and head of the AXA chair on Large Risks in Insurance. His current research

interests are in Financial Econometrics, especially in credit risk, term structure of interest

rates, longevity, hedge funds and regulation. Christian has received the Koopmans price

in Econometric Theory and the silver medal of CNRS (the French National Research

Found) for his research in Economics ; he has been a scientific adviser for credit scoring at BnpParibas

during 20 years, and consultant for Basel II at DEXIA and CIBC (Canada). He his a member of the scientificcommittees of the EURONEXT market indices, of the Autorit des Marchs Financiers (the French equivalent

of the SEC), of the Autorit de Controle Prudentiel ( the Authority for the new prudential regulation), and is in

the Board of the Bond Standard Committee (CNO). He has published widely, about 200 articles, in

Economics, Econometrics and Finance academic journals and he is the coauthor of several books.

Welcome to the 4th Annual Hedge Fund Research Conference, which presents the latest

research papers about Hedge Funds, from the most renowned academics.

With close to a hundred submissions from 50 universities in 15 countries, the 19 unpublished

papers which will be presented during the conference were selected following a thorough

screening process by a committee of internationally respected research professors.

3 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-edge topics. Over the last 3 years, the Annual Hedge Fund Research Conference has

thus been a platform for international visibility. Indeed, out of a total of 43 research papers

presented across the last 3 events, 13 of them have already been published in the most

renowned academic publications.

Serge Darolles(Lyxor Research and CREST),

Ren Garcia(Edhec Business School),

Christian Gouriroux(University of Toronto and CREST),

Andrew Patton(Duke University),

Tarun Ramadorai(University of Oxford),

Ronnie Sadka(Boston College).

SCIENTIFIC COMMITTEE


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>> 4

The first day will start and finish with the two sponsors

sessions. The Lyxor session treats the information

asymmetry issue. A body of the current hedge fund

literature studies the potential conflicts of interest between

fund managers and investors. Some protections

introduced to accommodate the common interest of

investors can induce information asymmetry between

managers and their clients. Ronnie Sadka studies in detailthe share restriction case. This information asymmetry

issue is also at the center of George Aragons paper. Fund

managers that delay their voluntary disclosures of fund

performance to public database introduce information

asymmetries between managers and investors. For the

NYSE session, High Frequency Trading will be the sujet

du jour. Two papers are presented during this session. In

Competing for Speed, Emiliano Pagnotta studies a

framework that both captures exchanges incentives to

invest in faster trading technologies and investors trading

decisions. Dale Rosenthal proposes a new performance

for algorithmic traders. Metrics decompose trading

performance into trading skill, patience, and order

scheduling skill versus luck.

The two other sessions of the days will be on systemic

risk and hedge fund risk profile. The systemic risk session

discusses the measures of the contribution of financial

entities to systemic risk around three recent research

papers. Giulio Girardi proposes a new definition of the

Value-at-Risk (VaR) of the financial system conditional on

an institution being in financial distress. Christian

Brownlees introduces an empirical methodology tomeasure systemic risk of the financial institution. And

finally Christian Gouriroux discusses the contributions of

financial entities to a global reserve from a regulatory

perspective. Concerning hedge fund risk profile, it is now

well recognized that risk premia embedded in Hedge

Fund returns are not linear. Marie Lambert proposes a

conditional higher-moment asset-pricing model with

location, trading and higher-moment factors to capture

the dynamic hedge fund styles. Mike Cliff presents a

model by which each funds alpha is drawn from one of

several distributions based on its managers skill level.

Jakub Jurek documents that the risk profile of the

aggregate hedge fund universe can be accurately

matched by a simple index put option writing strategy.

D A Y O N E

A D V E R S E H E D G E F U N D A C T I V I T I E S , R I S K P R O F I L E

A N D H I G H F R E Q U E N C Y T R A D I N G


5/20


>> 5

The second day will start with a session on market

contagion and ETFs. The importance of hedge fund

trading for understanding market contagion phenomena

is evident. Lakshithe Wagalath illustrates how feedback

effects due to distressed selling and short selling lead to

endogenous correlations between asset classes. Gaelle

Le Fol analyzes the illiquidity of emerging markets and the

consequences in terms of systemic risk. And even liquidinstruments such ETFs are today concerned by these

discussion. Rabih Moussawi presents evidence

consistent with the idea that ETFs serve as conduits for

transmission of non-fundamental shocks to the

underlying assets. The Hedge Fund disclosure session

centers around the policy debate over what constitutes

optimal hedge fund disclosure to investors and market

regulators. Zen Shi investigates the impact of portfolio

disclosure on hedge fund performance, fees and flows.

His study suggests that the cost of portfolio disclosure is

economically large for investors. Tarun Ramadorai

studies the reliability of voluntary disclosures. He finds

that funds that revise their performance histories

significantly and predictably underperform those that

have never revised. This suggests that unreliable

disclosures constitute a valuable source of information for

current and potential investors.

The two last sessions will be on hedge fund survival,

performance and fees. First, a good understanding of

hedge fund survival and failure is essential for any hedge

fund investor. The first paper in this section studies the

relation between liquidity and failure. Hedge fund liquidity

is often modeled using proxy variables such as lockup,

redemption notice and redemption frequency. Guillaume

Simon shows that the lockup variable is intrinsicallyendogenous and explains this way the rebound effect

observed for funds complying into the lockup settlement.

Emanuel Kastl in his research gives attention to family

membership as driver of hedge fund survival. His findings

indicate that family membership and increasing family

size significantly enhance hedge fund survival.

Concerning hedge fund performance and fees, Juha

Joenvra presents new stylized facts about hedge

funds and highlights the importance of hedge fund

database selection. He documents economically

important performance persistence that seems to be

mainly driven by small hedge funds. Moreover, Hedge

funds with greater managerial incentives outperform

while hedge funds with strict share restrictions are not

associated with higher risk-adjusted returns. Ivan Guidotti

proposes a rational model of the behavior of hedge fund

managers and investors that explains the variations of

fees charged by hedge funds.

D A Y T W O

H E D G E F U N D D I S C L O S U R E , P E R F O R M A N C E A N D

F E E S , M A R K E T C O N T A G I O N A N D E T F S


6/20


Chair: C. Gourieroux (University of Toronto)

Introduction by

L. Seyer (Chief Executive Officer, Lxyor AM)

G. Ozik (Edhec Business School),

R. Sadka (Boston College)

Skin in the Game versus Skimming the Games:

Governance, Share Restrictions and Insiders Flow

Discussant: J. Gaspar (ESSEC)

G. Aragon (Arizona State University),

V. Nanda (Georgia Tech University)

Strategic Delays and Clustering in Hedge Fund

Reported Returns

Discussant: F. Franzoni (University of Lugano)

>> 6

D A Y O N E



8.30-9.15REGISTRATION

10.45-11.15MORNING BREAK

9.15-10.45ADVERSE HEDGE FUND ACTIVITY / LYXOR SESSION

Ozik and Sadka

Skin in the Game versus Skimming the Games:

Governance, Share Restrictions and Insiders Flow

Share restrictions in the hedge-fund industry are often introduced as means of

protecting the common interest of investors. Yet, this paper advances that such

restrictions induce information asymmetry between managers and their clients about

future fund flows. Fund flows, in turn, predict future fund returns for share-restricted

funds, especially among funds with low levels of governance and funds managing

insiders' wealth, providing managers incentive to trade in advance of their clients. Somedirect evidences for such managerial action are presented, as well as additional

consistent evidences from the flows of funds in the same family. The evidence suggests

that private information about the fund, not only about the fundamental value of its

assets, may constitute material information. Such private information engenders

potential conflict of interest between fund managers and investors, with implications for

proper fund governance and disclosure policy concerning managerial actions.

Aragon and Nanda

Strategic Delays and Clustering

in Hedge Fund Reported Returns

We rely on a novel dataset to study the timing of hedge fund managers voluntary

disclosures of fund performance to a well-known database (TASS). We find that monthly

performance results are delayed by three weeks, on average, and that delays are longer

when performance is worse, public market news is better, and fund investors are

restricted from redeeming their shares. In addition, managers that delay reporting often

disclose the returns for two or more months simultaneously in clusters, in which the

returns in the initial months tend to be poor, but are followed by a strong performance

reversal in subsequent months. Lastly, we find that investor capital flows into funds are

significantly lower after managers fail to make timely reports on monthly performance.

The results suggest that strategic delay plays an important role in the disclosure of

hedge fund returns.


7/20


Chair: L. Clerc (Banque de France)

G. Girardi (Suffolk University),A. Tolga Ergn (Suffolk University)

Systemic Risk Measurement: Multivariate GARCH

Estimation of CoVaR

Discussant: C. Hurlin (Orleans University)

C Brownlees (Universitat Pompeu Fabra),R. Engle (New York University)

Volatility, Correlation and Tails for Systemic Risk

Measurement

Discussant: A. Monfort (CREST)

C. Gouriroux (University of Toronto),A. Monfort (CREST)

Allocating Systematic and Unsystematic Risks

in a Regulatory Perspective

Discussant: F. Pegoraro (Banque de France)

>> 7

11.15-13.15SYSTEMIC RISK

13.15-14.30LUNCH BREAK

Girardi and Tolga ErgnSystemic Risk Measurement:

Multivariate GARCH Estimation of CoVaR

We modify Adrian and Brunnermeiers (2010) CoVaR, the Value-at-Risk (VaR) of the

financial system conditional on an institution being in financial distress. We change the

definition of financial distress from an institution being exactly at its VaR to being at most

at its VaR. This change allows us to consider more severe distress events that are farther

in the tail; to estimate CoVaR using the full-suite of GARCH models; and to backtest

CoVaR. We define the systemic risk contribution of an institution as the change from its

CoVaR in its benchmark state, which we take as a one-standard deviation event, to its

CoVaR under financial distress. We estimate the systemic risk contributions of four

financial industry groups consisting of a large number of institutions for the sample

period June 2000 to February 2008. We also investigate the link between institutions

contributions to systemic risk and their characteristics such as size, leverage, and equity

beta. Finally, using 12 months of data prior to the beginning of June 2007, we compute

industry groups pre-crisis systemic risk contributions.

Brownlees and Engle

Volatility, Correlation and Tails for

Systemic Risk Measurement

In this paper we propose an empirical methodology to measure systemic risk. Building

upon Acharya et al. (2010), we think of the systemic risk of a financial institution as its

contribution to the total capital shortfall of the financial system that can be expected in a

future crisis. We propose a systemic risk measure (SRISK) that captures the expected

capital shortage of a firm given its degree of leverage and Marginal Expected Shortfall

(MES). MES is the expected loss an equity investor in a financial firm would experience if

the overall market declined substantially. To estimate MES, we introduce a dynamic model

for the market and firm returns. The specification is characterized by time varying volatility

and correlation, which are modelled with the familiar TARCH and DCC. We do not make

specific distributional assumptions on the model innovations and rely on flexible methods

for inference that allow for tail dependence. The model is extrapolated to estimate the equity

loss of a firm in a future crisis and consequently the capital shortage that would be

experienced depending on the initial leverage. The empirical application on a set of top U.S.

financial firms finds that the methodology provides useful rankings of systemically risky firms

at various stages of the financial crisis. One year and a half before the Lehman bankruptcy,eight companies out of the SRISK top ten turned out to be troubled institutions. Results

also highlight the deterioration of the capitalization of the financial system starting from

January 2007 and that as of July 2010 the system does not appear fully recovered.

Gouriroux and Monfort

Allocating Systematic and Unsystematic Risks

in a Regulatory Perspective

This paper discusses the contributions of financial entities to a global reserve from a regulatory

perspective. We introduce axioms of decentralization, additivity and compatibility with risk

ordering, which should be satisfied by the contributions of the entities and we characterize theset of "coherent" contributions compatible with these axioms. Then, we explain how to

disentangle the systematic and unsystematic risk components of these contributions. Finally,

we discuss the usual relationship between baseline reserve and reglementary required capital,

and propose alternative solutions to the question of procyclical required capital.


8/20


Chair: R. Sadka (Boston College)

G. Hbner (University of Liege),M. Lambert (Maastricht University),N. Papageorgiou (HEC Montreal)

Higher-moment Risk Exposures in Hedge Funds

Discussant: E. Jurczenko (ESCP Paris)

Y. Chen (Virginia Tech),

M. Cliff (Analysis Group),H. Zhao (Georgia State University)

Hedge Funds: The Good, the (Not-so) Bad,

and the Ugly

Discussant: H. Pirotte (University of Brussels)

J. Jurek (Princeton University),E. Stafford (Harvard Business School)

The Cost of Capital for Alternative Investments

Discussant: G. Ozik (Edhec Business School)

>> 8

D A Y O N E



16.30-17.00 AFTERNOON BREAK

14.30-16.30HEDGE FUND RISK PROFILE

Hbner, Lambert and Papageorgiou

Higher-moment Risk Exposures in Hedge Funds The paper singles out the key roles of US equity skewness and kurtosis in the

determination of the market premia embedded in Hedge Fund returns. We propose a

conditional higher-moment asset pricing model with location, trading and higher-

moment factors in order to describe the dynamics of the Equity Hedge (Market Neutral,

Short Selling and Long/Short strategies), Event Driven, Relative Value, and Funds of

Hedge Funds styles. The volatility, skewness and kurtosis implied in the US options

markets are used by Hedge Fund managers as instruments to anticipate market

movements. Managers should adjust their market exposure in response to variations in

the implied higher moments. We show that higher-moment premia improve a

conditional asset pricing model both in terms of explanatory power (R-squares and

Schwarz criterion) and specification errors across all Hedge Fund styles.

Chen, Cliff and Zhao

Hedge Funds: The Good, the (Not-so) Bad, and the Ugly

This paper proposes a new methodology to evaluate the prevalence of skilled fund

managers. We assume that each funds alpha is drawn from one of several distributions

based on its skill level (e.g., good, neutral, or bad). For a sample of funds, the composite

distribution of alpha is thus a mixture of the underlying distributions. We use the

Expectation-Maximization algorithm to infer the proportion of funds of different skill levels

and estimate the conditional probability each fund is of a skill type given estimated

alpha. Applying our approach to hedge funds over 19942009, we find that about 50%

of funds have positive skill. Funds identified by our approach as superior persistentlydeliver high out-of-sample alpha over the next three years. While investors chase past

performance, inflows do not reduce fund performance in the near future.

Jurek and Stafford

The Cost of Capital for Alternative Investments

This paper studies the cost of capital for alternative investments. We document that the

risk profile of the aggregate hedge fund universe can be accurately matched by a simple

index put option writing strategy that offers monthly liquidity and complete transparency

over its state-contingent payoffs. The contractual nature of the put options in the

benchmark portfolio allows us to evaluate appropriate required rates of return as afunction of investor risk preferences and the underlying distribution of market returns.

This simple framework produces a number of distinct predictions about the cost of

capital for alternatives relative to traditional mean-variance analysis.


9/20


Chair: G. Le Fol (Paris Dauphine University)

Introduction by

A. Cordell (Head of Equity Derivatives andOTC Services, NYSE Liffe)

E. Pagnotta (New York University),T. Philippon (New York University)

Competing on Speed

Discussant: A. Menkveld (VU University

Amsterdam)

D. Rosenthal (University of Illinois at Chicago)

Performance Metrics for Algorithmic Traders

Discussant: L. Hvozdyk (University of Cambridge)

>> 9

17.00-18.30HIGH FREQUENCY TRADING / NYSE LIFFE SESSION

Pagnotta and PhilipponCompeting on Speed

Two forces have reshaped global securities markets in the last decade: Exchanges

operate at much faster speeds and the trading landscape has become more

fragmented. In order to analyze the positive and normative implications of these

evolutions, we study a framework that captures (i) exchanges incentives to invest in

faster trading technologies and (ii) investors trading and participation decisions. Our

model predicts that regulation that protects investors prices (e.g. SECs order

protection rule) will lead to fragmentation and faster trading speed. On normative side,

we find that for a given number of exchanges, faster trading is socially desirable.

Similarly, for a given trading speed, competition among exchange increases

participation and welfare. However, when speed is endogenous, competition between

exchanges is not necessarily desirable. In particular, speed can be inefficiently high. Ourmodel sheds light on important features of the experience of European and U.S.

markets since the implementation of Reg. NMS, and provides some guidance for

optimal regulations.

Rosenthal

Performance Metrics for Algorithmic Traders

Portfolio traders may split large (parent) orders into child orders sent on a schedule to

reduce price impact. These child orders are often traded in an automated (\algorithmic")

manner. This paper introduces performance metrics which help portfolio managers

measure various trading skills with low noise. The metrics use parent and child orders andare robust to order splitting. The full set of metrics decomposes trading performance into

trading skill, patience, and order scheduling skill versus luck. This decomposition allows

managers to assess the performance of separate components of an automated trading

process. The metrics also relate to a price impact model with permanent, decaying, and

temporary components which allows recovery of model parameters. Some metrics may be

used to evaluate external intermediaries, to test for possible front-running, and to reduce

the cost of trading.


10/20


Chair: TBD

R. Cont (Columbia University),L. Wagalath (Paris 6 University)

Running for the Exit: Distressed Selling and

Endogenous Correlation in Financial Markets

Discussant: B. Klaus (Banque de France)

S. Darolles (Lyxor Research),

J. Dudek (CREST),

G. Le Fol (Paris Dauphine University)

Liquidity Contagion: a Look at Emerging Markets

Discussant: M. Billio (University of Venice)

>> 10

D A Y T W O



9.00-11.00MARKET CONTAGION AND ETFS

Cont and Wagalath

Running for the Exit: Distressed Selling and EndogenousCorrelation in Financial Markets

We propose a simple multiperiod model of price impact from trading in a market with

multiple assets, which illustrates how feedback effects due to distressed selling and short

selling lead to endogenous correlations between asset classes. We show that distressed

selling by investors exiting a fund and short selling of the funds positions by traders may

have non-negligible impact on the realized correlations between returns of assets held by

the fund. These feedback effects may lead to positive realized correlations between

fundamentally uncorrelated assets, as well as an increase in correlations across all asset

classes and in the funds volatility which is exacerbated in scenarios in which the fund

undergoes large losses. By studying the diffusion limit of our discrete time model, we

obtain analytical expressions for the realized covariance and show that the realized

covariance may be decomposed as the sum of a fundamental covariance and a liquidity-

dependent excess covariance. Finally, we examine the impact of these feedback effects

on the volatility of other funds. Our results provide insight into the nature of spikes in

correlation associated with the failure or liquidation of large funds.

Darolles, Dudek and Le Fol

Liquidity Contagion: a Look at Emerging Markets

Emerging economies have passed an important stress test during the period 2008-2009

and are now the key drivers for global growth of the world economy. The explosive

expansion that emerging markets are showing during last years is mainly due to

substantial returns that investors made. However, literature exposes that poor liquidity isone of the main reasons for foreign institutional investors not to invest in emerging markets.

The main contribution of this paper is to propose to analyze the liquidity of emerging

markets and their effects on the contagion from one another in order to prevent illiquid

events or systemic risk. Emerging market liquidity measures are the basis for the sovereign

debt market, and the deviations of the covered interest parity for the foreign exchange

market. One classical way to identify contagion is to observe an increase in correlation

between asset returns during a crisis period. However, since crisis periods are typically

characterized by an increase in volatility, it is crucial to discriminate between volatility and

pure-correlation rises. One way to tackle this problem is to use a state-space model with

a time-varying volatility specification and apply it to both returns and liquidity indicators.


11/20


11.00-11.30MORNING BREAK

I. Ben David (Ohio State University),

F. Franzoni (University of Lugano),

R. Moussawi (University of Pennsylvania)

ETFs, Arbitrage, and Shock Propagation

Discussant: G. Aragon (Arizona State University),

Chair: R. Garcia (EDHEC Business School)

Z. Shi (Georgia State University)

The Impact of Portfolio Disclosures on Hedge

Fund Performance, Fees, and Flows

Discussant: I. Nagy (University of Neuchatel)

A. Patton (Dike University),

T. Ramadorai (University of Oxford),M. Streatfield (University of Oxford)

The Reliability of Voluntary Disclosures:

Evidence from Hedge Funds

Discussant: TBD

>> 11

11.30-12.50

HEDGE FUND DISCLOSURE

12.50-14.15LUNCH BREAK

Ben David, Franzoni and Moussawi

ETFs, Arbitrage, and Shock Propagation

The number of ETFs and the assets they manage have experienced significant growth

over the last decade. These instruments are appealing to investors because they

provide a cheap way to access different markets and asset classes. This paper presentsevidence consistent with the idea that ETFs serve as conduits for transmission of non-

fundamental shocks to the underlying assets. The transmission occurs via the arbitrage

activity that keeps their price aligned with the price of the underlying assets. We show

that an increase in ETF ownership is associated with a rise in the volatility of the

underlying. Furthermore, a deviation of the ETF price from its net asset value is followed

on the next day be a movement in the same direction of the price of the underlying

asset. Finally, during the Flash Crash of May 2010, ETF mispricing arbitrage contributed

to transmit the liquidity shock from the futures market to the equity market.

ShiThe Impact of Portfolio Disclosure on Hedge FundPerformance, Fees, and Flows

This study investigates the impact of portfolio disclosure on hedge fund performance.

Using a regression discontinuity design, I investigate the effect of the disclosure

requirements that take effect when an investment company's assets exceed $100

million; when that occurs, a fund is required by the SEC to submit form 13F disclosing

its portfolio holdings. Consistent with the argument that portfolio disclosure reveals "trade

secrets" and also raises front running costs thus harms the funds that disclose, I find that

there is a drop in fund performance (about 4% annually) after a fund begins filing form

13F, as well as an increase in return correlations with other hedge funds in the same

investment style. The drop in performance cannot be explained by a change in the assets

under management or a mean reversion in returns. Consistent with the idea that funds

with illiquid holdings tend to employ sequential trading strategies, which increase the

likelihood of being taken advantage of by free riders and front runners, the drop in

performance is more dramatic for funds that have more illiquid holdings. In addition, I find

that the incentive fees paid to fund managers are 1% higher when portfolio disclosure is

required, which supports the hypothesis that investors' monitoring of portfolio holdings

disciplines adverse risk-taking by fund managers and allows for higher convexity in the

optimal compensation structure. Finally, there is a drop in flows into funds that file 13F,

which suggests that hedge fund investors negatively value 13F disclosure. Overall, thisstudy suggests that the cost of portfolio disclosure is economically large. It contributes

to the policy debate over what constitutes optimal disclosure.

Patton, Ramadorai and Streatfield

The Reliability of Voluntary Disclosures:

Evidence from Hedge Funds

We analyze the reliability of voluntary disclosures of financial information, focusing on widely-

employed publicly available hedge fund databases. Tracking changes to statements of

historical performance recorded at different points in time between 2007 and 2011, we find

that historical returns are routinely revised. These revisions are not merely random orcorrections of earlier mistakes; they are partly forecastable by fund characteristics. Funds

that revise their performance histories significantly and predictably underperform those that

have never revised, suggesting that unreliable disclosures constitute a valuable source of

information for current and potential investors. These results speak to current debates

about mandatory disclosures by financial institutions to market regulators.


12/20


Chair: T. Ramadorai (University of Oxford)

G. Simon (Capital Fund Management)

Does Lockup Increase Hedge Funds Lifetimes

Discussant: Xavier dHaultfoeuille (CREST)

E. Kastl (Cass Business School)How Does Family Membership Influence Hedge

Fund Survival?

Discussant: G. Mero (University of Cergy)

>> 12

D A Y T W O



15.55-16.10 AFTERNOON BREAK

14.15-15.55HEDGE FUND SURVIVAL

Simon

Does Lockup Increase Hedge Funds LifetimesHedge fund liquidity is often modelled using proxy variables such as lockup (impediment

on the withdrawal of initial capital), redemption notice and redemption frequency (time

of request and time to wait before an investor gets her money back). We show in this

paper that (i) the lockup variable is intrinsically endogenous, that (ii) using redemptions

variables as instruments allow to estimate a causal effect of the lockup on the survival

of the fund (larger than the duration of the lockup itself) and that (iii) this effect is in line

with the literature arguing for a rebound effect for funds complying into the lockup

settlement.

Kastl

How Does Family Membership Influence

Hedge Fund Survival?

The purpose of this paper is to develop an enhanced understanding of hedge fund

survival and failure. Although hedge fund survival and some of its causes (e.g. returns,

fund size, etc.) have been discussed in extant literature, little attention was given to

family membership as driver of hedge fund survival. This investigation is important, since

prior research (e.g. Boyson, 2008) indicates that more than half of the funds in the

hedge fund industry are part of a fund family. Drawing on a large-scale dataset, I analyze

the impact of family membership and family size on hedge fund survival while controlling

for survival impacting factors identified by extant literature. The findings, which are

consistent across two chosen statistical models, indicate that family membership and

increasing family size significantly enhance hedge fund survival. For explanations of thisresult, I draw on the literature of embeddedness and expand its scope to

intraorganizational relationships within a hedge fund family.


13/20


Chair: TBD

J. Joenvr (University of Oulu),R. Kosowski (Imperial College),

P. Tolonen (University of Oulu)

Revisiting "Stylized Facts" about Hedge Funds

Discussant: A. Siegmann (VU University

Amsterdam)

P. Guidotti (University of Neuchatel),I. Nagy (University of Neuchatel)

Rational Behavior of Hedge Fund Managers and

Investors

Discussant: G. Calice (University of Southampton)

>>13

16.10-17.50HEDGE FUND PERFORMANCE AND FEES

Joenvr, Kosowski and TolonenRevisiting "Stylized Facts" about Hedge Funds

This paper presents new stylized facts about hedge funds and highlights the importance

of hedge fund database selection. We propose a novel, easily replicable, approach for

merging all the major hedge fund databases which have not been jointly analyzed to

date. To mitigate data biases, we exploit the information contained in hedge fund share

classes across databases so as to obtain the longest possible return and AuM time-

series for each individual hedge fund employing a unique investment strategy. Using a

comprehensive hedge fund data base, we document economically important

performance persistence that seems to be mainly driven by small hedge funds. Hedge

funds with greater managerial incentives outperform while hedge funds with strict share

restrictions are not associated with higher risk-adjusted returns. When these new

stylized facts are compared with those from the individual databases, we find that theconclusions based on the consolidated database are qualitatively different

from those based on the individual database. To avoid biases, it is therefore important

to use a consolidated data base since the stylized facts inferred from individual

databases may differ significantly from the population.

Guidotti and Nagy

Rational Behavior of Hedge Fund Managers and Investors

Portfolio traders may split large (parent) orders into child orders sent on a schedule to

reduce price impact. These child orders are often traded in an automated (\algorithmic")manner. This paper introduces performance metrics which help portfolio managers

measure various trading skills with low noise. The metrics use parent and child orders and

are robust to order splitting. The full set of metrics decomposes trading performance into

trading skill, patience, and order scheduling skill versus luck. This decomposition allows

managers to assess the performance of separate components of an automated trading

process. The metrics also relate to a price impact model with permanent, decaying, and

temporary components which allows recovery of model parameters. Some metrics may be

used to evaluate external intermediaries, to test for possible front-running, and to reduce

the cost of trading.


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>> 14

2 0 1 1 C O N F E R E N C E

RESEARCH PAPERSFROM PREVIOUS EVENTS

Adrian

Ang

Landier

Ramadorai

Menkveld

Sadka

Ozik

Teo

Bollen

Nanda

Gourieroux

Billio

Criton

Cao

Hau

Gianetti

Federal Reserve Bank

of New York

Columbia University

Toulouse School of

Economics

University of Oxford

VU University

Boston College

EDHEC Business

School

Singapore Management

University

Vanderbilt University

Georgia Tech University

University of Toronto

University of Venice

Lombard Odier

Penn State University

University of Geneva

Stockholm School of

Economics

Broker-Dealer Leverage and the Cross-Section of

Stock Returns

Hedge Fund Leverage

Stock Price Manipulation by Hedge Funds

Capacity Constraints, Investor Information, and Hedge

Fund Returns

Middlemen in Limit-Order Markets

Do Hedge Funds Reduce Idiosyncratic Risk?

Media and Investment Management

Hedge Funds and Analyst Conflicts of Interests

Zero-R2 Hedge Funds and Market Neutrality

On Tournament Behavior in Hedge Funds: High Water

Marks, Fund Liquidation, and the Backfilling Bias

Survival of Hedge Funds: Frailty vs Contagion

Hedge Funds Tail Risk and Marginal Risk Contribution

in Fund of Hedge Funds

Unsupervised Risk Factor Clustering: A Construction

Framework for Funds of Hedge Funds

Can Hedge Funds Time Market Liquidity?

Role of Equity Funds in the Financial Crisis

Investors Horizons and the Amplification of Market

Shocks

Working paper

Journal of Financial Economics, 2011

Working paper

Journal of Financial Economics,

forthcoming

Working paper

Working paper

Working paper

Working paper

Journal of Financial and Quantitative

Analysis, forthcoming

The Review of Financial Studies,

forthcoming

Working paper

PAPER

PRESENTED BYFROM TITLE CURRENT STATUS /

PUBLICATION


15/20


>>15

2 0 1 0 C O N F E R E N C E


Plantin

Gouriroux

Fos

Billio

Byksahin

Polk

Teo

Sadka

Papageorgiou

Garcia

Hau

Ramadorai

Franzoni

Kosowski

Patton

Toulouse School of

Economics


Columbia University


International EnergyAgency

London School of

Economics

Singapore Management

University

Boston College

HEC Montreal

EDHEC Business

School

University of Geneva

University of Oxford

University of Lugano

Imperial College

Duke University

Rewarding Trading Skills Without Inducing Gambling?

The Effects of Management and Provision Accounts

Inferring Reporting Biases in Hedge Fund Databases

from Hedge Fund Equity Holdings

Measuring Systemic Risk in the Hedge Fund, Finance

and Insurance Sectors

Speculators, Commodities and Cross-Market

Connected Stocks

The Liquidity Risk of Liquid Hedge Funds

Liquidity Risk and the Cross-Section of Hedge-Fund

Performance Analysis of a Collateralized Fund

Obligation (CFO) Equity Tranche

The Option CAPM and The Performance of Hedge

Funds

The Exchange Rate Effect of Multi-Currency Risk

Arbitrage

Asset Fire Sales and Purchases and the International

Transmission of Funding Shocks,

Hedge Fund Stock Trading in the Financial Crisis of

2007-2009

Hedge Fund Predictability Under the Magnifying

Glass: Forecasting Individual Fund Returns Using

Multiple Predictors

On the Dynamics of Hedge Fund Risk Exposures



The European Journal of Finance,

forthcoming

Review of Derivatives Research,

forthcoming

Working paper

Journal of Finance, forthcoming

Review of Financial Studies,

fothcoming

PAPER


PUBLICATION


16/20


>> 16

2 0 0 9 C O N F E R E N C E


Madan

Gouriroux

Garcia

Teiletche

Florens

Billio

Agarwal

Kosowski

Cont

Patton

Bollen

Thesmar

University of Maryland


EDHEC Business

School

Lombard Odier

Toulouse School of

Economics


Georgia State University

Imperial College

Columbia University

Duke University

Vanderbilt University

HEC Paris

Hedge Fund Performance: Sources and Measures

L-Performance with an Application to Hedge Funds

Empirical Likelihood Estimators for Stochastic

Discount Factors

The Dynamics of Hedge Fund Performances

Hedge Funds Durations: Endogeneity of Performance

and AUM

Crises and Hedge Fund Risk

Do Higher-Moment Equity Risks Explain Hedge Fund

Returns?

When there is No Place to Hide: Correlation Risk and

the Cross-Section of Hedge Fund Returns

When Diversification Increases Risk: Feedback Effects

and Endogenous Correlation in Fund Returns

Time-Varying Liquidity in Hedge Fund Returns

Locked up by a lockup: Valuing liquidity as a real

Limits of Limits of Arbitrage: Theory and Evidence

International Journal of Theoretical

and Applied Finance, 2009

Journal of Empirical Finance, 2009

Financial Management, 2010

PAPER


PUBLICATION


17/20


>>17

N Y S E L I F F E

G L O B A L D E R I V A T I V E S

NYSE Liffe, the global derivatives

business of NYSE Euronext

NYSE Liffe operates futures and optionsmarkets in both Europe and the U.S.

NYSE Liffe offers a broad choice of derivativesincluding those based on short-term interestrates, single stocks, indices, swaps, governmentbonds, commodities and currencies allavailable to trade via LIFFE CONNECT. All listedproducts benefit from the safety andtransparency of a centrally cleared, electronic

market.

For customers that prefer to trade in the over-the-counter (OTC) market, NYSE Liffe offersBclear. Bclear is NYSE Liffes OTC service forcustomers who want to conduct business awayfrom the central market but who still want thebenefits of central clearing and processing.Bclear is used extensively by leading investmentbanks and buy-side firms to process OTCderivatives business, helping them to reduceoperational risk and manage counterparty risk.

NYSE Liffe Clearing is NYSE Liffes clearing

service for its members. It covers all products onNYSE Liffes London market, including tradesbooked through its Bclear facility.

Further InformationFor up-to-date information on our range of fixedincome, equity and commodity derivatives

products and services, please visit:

www.nyx.com/nyseliffe

Or contact:Fixed Income Derivatives+44 (0)20 7379 [email protected]

Equity Derivatives+44 (0)20 7379 [email protected]

Commodity Derivatives+44 (0)20 7379 [email protected]

Fixed Income derivatives

NYSE Liffes fixed income derivatives portfolio offers an extensive range of financialproducts, including short-term interest rate (STIR) futures and options, swap futures,government bond and FX futures all within a high speed and secure environment viaour central market. Our three month Euribor and Short Sterling product suites,amongst the most traded STIR futures and options contracts world-wide, offerenhanced hedging and spread opportunities against the front-end of the Euro andSterling yield curve, whilst our portfolio of Gilt and Swapnote futures and optionscontracts provide cost-effective exposure to longer term interest rates andcomprehensive coverage further along the yield curve.

Trading strategies are also available for interest rate futures and options contracts to

allow market participants to take a range of views in one trade and also to bettermanage their execution risk.

Equity Derivatives

NYSE Liffe offers a wide range of equity derivative products: Futures and options on leading indices including the AEX-index, BEL 20, CAC 40,

FTSE 100 and futures on the PSI 20 Stock options on leading European companies Stock futures on an international range of blue-chip companies Options on exchange traded funds We also list 48 Bclear MSCI Index Futures via the Bclear service

As well as the OTC service Bclear, NYSE Liffe also offers Cscreen, providing customers

a more efficient way of discovering prices for equity derivatives. As a global pre-tradeprice discovery platform, over 4,000 underlyings are available on Cscreen from a widevariety of global markets, including Asia, Australia, Eastern and Western Europe, India,North and South America, Russia and South Africa.

Commodity Derivatives

NYSE Liffes commodity futures contracts have long been relied upon as global andEuropean benchmarks for Cocoa, Robusta Coffee, White Sugar, Feed Wheat, MillingWheat, Rapeseed and Corn.

The futures contracts, alongside the associated options contracts, are extensively usedfor price-risk management by producers, exporters, trade-houses, processors, refinersand manufacturers. In addition, they are actively traded by managed funds, proprietary

traders, institutional investors and market makers looking for exposure to soft andagricultural commodity markets.

The level of liquidity combined with the price volatility inherent in the underlying marketsprovides a wide range of trading opportunities over both the short and long term, aswell as offering effective portfolio diversification. Trading strategies commonly used inthese markets include calendar spreads and arbitrage against other related markets.

About NYSE Euronext

NYSE Euronext (NYX) is a leading global operator of financial markets and provider ofinnovative trading technologies. The companys exchanges in Europe and the United Statestrade equities, futures, options, fixed-income and exchange-traded products. Withapproximately 8,000 listed issues (excluding European Structured Products), NYSEEuronexts equities markets the New York Stock Exchange, NYSE Euronext, NYSE Amex,NYSE Alternext and NYSE Arca represent one-third of the worlds equities trading, themost liquidity of any global exchange group. NYSE Euronext also operates NYSE Liffe, oneof the leading European derivatives businesses and the worlds secondlargest derivativesbusiness by value of trading. The company offers comprehensive commercial technology,connectivity and market data products and services through NYSE Technologies. NYSEEuronext is in the S&P 500 index, and is the only exchange operator in the Fortune 500. Formore information, please visit: http://www.nyx.com.


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>> 18

LY X O R R E S E A R C H

A L T E R N A T I V E I N V E S T M E N T S & R I S K

M A N A G E M E N T R E S E A R C H

Experience Driven by

Acknowledged Research

Lyxor Asset Management derives its establishedexperience as a leading asset manager from aunique and thorough research expertise. Morethan 20 research professionals are exclusivelydedicated to providing macro-economic,alternative and quantitative research across allLyxor businesses.

The solid synergies developed between fundmanagers and research specialists ensure the

robustness of every investment process. Theircomprehensive missions involve hedge fundsourcing and selection, cross-asset investmentstrategy, risk analysis, and the design of newproprietary models.

They also ensure regular presentations andacademic publications (White Paper Series) tocommunicate these best practices and assetmanagement methodologies to the industry. Byfocusing on critical topics such as portfolioconstruction, asset allocation and riskmeasurement, it leads to the development ofnew quantitative strategies and financial models

that can be directly applied to Lyxor'sinvestment solutions.

Further Informationwww.lyxor.com

Or contact:[email protected]

+33.1.42.13.76.75

Innovative Investment Solutions

Lyxor is among a selected few asset managers to offer investors such a broad range ofsolutions from pure beta to alternative alpha:

> Managed Account Platform: With about US$11 billion under management acrossmore than 100 funds, the Lyxor Managed Account Platform offers the largest and ever-evolving investment universe, with more than 25 new managed accounts launched thisyear. The Platform also provides investors with unparalleled transparency - recentlyoptimized by a sophisticated new website technology -, advanced risk monitoring andweekly liquidity. Thanks to its pioneering and innovation capacities, Lyxors Managed Account expertise has paved the way for tailor-made platforms for the biggestinstitutions willing to bring their own selected Hedge Funds within Lyxors technology

and risk monitoring processes.

> Funds of Hedge Funds: Lyxors range of funds of hedge funds relies on rigorous fundselection, dynamic portfolio allocation, and disciplined risk management. Lyxors funds offunds business is designed for clients with a broad range of liquidity and risk profiles.

>Alternative Indexing: Lyxors range of 17 investable hedge fund indices and 13index funds offers either direct exposure to the global hedge fund universe or to aspecific hedge fund strategy.

> ETFs & Index funds: Lyxor pionneered this market segment in Europe, with thelaunch of the first ETF on CAC40 in 2001, managing now 224 ETFs. Since then, Lyxorhas become a market leader in Europe with more than 438 listings on equity, bond andcommodity indices listed on 14 trading platforms worldwide. Lyxor also offers acomplete range of index funds tracking all major markets and has developped a

proprietary risk-weighted indexing model applied in open-ended funds and the LyxorsmartIX indices.

> Quantitative Investments: Based on a renowned R&D team and a strong riskculture, Lyxor provides a full-range of cross-asset solutions, combining experience andskills in market access, trend-following and advanced diversification techniques. Thisquantitative expertise focuses on assets that are sufficiently liquid for marketmechanisms to function properly.

> Structured Investments: With more than 10 years of success and innovation, Lyxorhas been the first asset management company to specialise in structured funds and tothis day has remained the leader in the field, offering one of the largest selections ofcushion funds and formula funds in the market.

About Lyxor Asset Management

Lyxor Asset Management, subsidiary of Societe Generale Group, is a specialisedprovider of advanced investment solutions. We focus on offering innovative sources ofperformance anchored on research and risk management, with a maximum of safety,liquidity and transparency, adapted to our clients needs and risk/return profile.

With over EUR 75.9 billion in assets under management*, Lyxor has established itselfas a global player in four major growing investment specialties: alternative investments,index tracking (ETFs), quantitative investments and structured solutions. More than adecade of experience provided Lyxor with an in-depth knowledge and insights intoasset allocation strategy and research.

Employing more than 600 staff, Lyxor is present in every strategic investment locationsin the world.

*As of November 30th 2011


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Lyxor Asset Management

Tours Socit Gnrale - 17 Cours Valmy

92987 Paris La Dfense Cedex - France

www.lyxor.com - [email protected]

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