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A model of emulation funds

journal contribution
posted on 01.09.2015, 00:00 authored by Z Chen, F D Foster, D R Gallagher, Adrian LeeAdrian Lee
Emulation funds are a potentially cost-effective way for multimanager funds to improve their investment performance by delaying and netting trade signals from underlying managers. We develop a model to represent the expected sources of differential performance in an emulation fund relative to its underlying multimanager portfolio. The model formalises the expected interaction between potential savings and opportunity costs and allows us to observe complexities in the emulation process that are hidden without a benchmark. Finally, the functional representation of the model allows sensitivity analysis of the emulation fund to key parameters and enables us to determine theoretically optimal lag periods.

History

Journal

Accounting and finance

Volume

55

Issue

3

Pagination

717 - 748

Publisher

Wiley

Location

Chichester, Eng.

ISSN

0810-5391

eISSN

1467-629X

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2014, AFAANZ