Correspondence: Greg N. Gregoriou, 101 Broad Street, Plattsburgh, New York 12901, USA. Tel: +1 518 564 4202; Fax: +1 518 564 4215; Email: greg.gregoriou@plattsburgh.edu

¹is Associate Professor of Finance at State University of New York at Plattsburgh and Hedge Fund Editor for Derivatives Use, Trading and Regulation.

²is Associate Professor of Economics at State University of New York (Plattsburgh).

Received 27 October 2006; Revised 27 October 2006.

Abstract

The authors survey numerous hedge fund studies related to their institutional, historical and performance characteristics; their purpose and effectiveness in achieving balanced portfolios and the relationship of returns to manager skill, style, size and other characteristics. Also, a survey of statistical difficulties frequently encountered in evaluating databases of companies specialising in hedge funds including survival, selection and other biases; management selection methods and statistical methodologies used in asset selection for hedge funds and fund of funds is addressed.