NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Andrea Rossi

University of Arizona
Eller College of Management
Department of Finance
1130 E. Helen St.
Tucson, AZ 85721

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Arizona

NBER Working Papers and Publications

June 2020The Performance of Hedge Fund Performance Fees
with Itzhak Ben-David, Justin Birru: w27454
We study the long-run outcomes associated with hedge funds' compensation structure. Over a 22-year period, the aggregate effective incentive fee rate is 2.5 times the average contractual rate (i.e., around 50% instead of 20%). Overall, investors collected 36 cents for every dollar earned on their invested capital (over a risk-free hurdle rate and before adjusting for any risk). In the cross-section of funds, there is a substantial disconnect between lifetime performance and incentive fees earned. These poor outcomes stem from the asymmetry of the performance contract, investors' return-chasing behavior, and underwater fund closures.
March 2016Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders
with Itzhak Ben-David, Justin Birru: w22115
We study whether industry familiarity is an advantage in stock trading by exploring the trading patterns of industry insiders in their own personal portfolios. To do so, we identify accounts of industry insiders in a large dataset provided by a retail discount broker. We find that insiders trade firms from their own industry more frequently. Furthermore, they earn abnormal returns exclusively when trading own-industry stocks, especially obscure stocks (small, low analyst coverage, high volatility). In a battery of tests, we find no evidence of the use of private information. The results are most consistent with the interpretation that industry familiarity is an advantage in stock trading.

Published: Itzhak Ben-David & Justin Birru & Andrea Rossi, 2018. "Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders," Journal of Financial Economics, . citation courtesy of

 
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