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Hedge Funds: A Dynamic Industry in Transition

Author

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  • Andrew W. Lo

    (AlphaSimplex Group, LLC, Cambridge, Massachusetts 02142; and MIT Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142-1347)

  • Mila Getmansky

    (Isenberg School of Management, University of Massachusetts, Amherst, Massachusetts 01003)

  • Peter A. Lee

    (AlphaSimplex Group, LLC, Cambridge, Massachusetts 02142)

Abstract

The hedge-fund industry has grown rapidly over the past two decades, offering investors unique investment opportunities that often reflect more complex risk exposures than those of traditional investments. In this article, we present a selective review of the recent academic literature on hedge funds as well as updated empirical results for this industry. Our review is written from several distinct perspectives: the investor's, the portfolio manager's, the regulator's, and the academic's. Each of these perspectives offers a different set of insights into the financial system, and the combination provides surprisingly rich implications for the Efficient Markets Hypothesis, investment management, systemic risk, financial regulation, and other aspects of financial theory and practice.

Suggested Citation

  • Andrew W. Lo & Mila Getmansky & Peter A. Lee, 2015. "Hedge Funds: A Dynamic Industry in Transition," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 483-577, December.
    • Handle: RePEc:anr:refeco:v:7:y:2015:p:483-577
    DOI: 10.1146/annurev-financial-110311-101741
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    19. Sandro Lunghi & Daniel Schmidt & Bastian von Beschwitz, 2021. "Fundamental Arbitrage under the Microscope: Evidence from Detailed Hedge Fund Transaction Data," Finance and Economics Discussion Series 2021-022, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    Keywords

    alternative investments; financial crisis; hedge funds; illiquidity; investment management; long/short;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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    Access and download statistics

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