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Editorial for Challenge
Ramo Gençay, Amir Yaron, Dirk Hackbarth and Andrea Eisfeldt
FRL has served members of the finance research community as an outlet for their work. We would like to see FRL’s mission as being even broader. In particular, we would like our journal also to stimulate research directly. As a result, we have started a new feature where we invite researchers to point out “challenges” that lie before the profession. The idea is that such challenges will be provocative, thereby inspiring new research. Sheridan Titman of University of Texas Austin has kindly consented to be our second challenge presenter. The question he raises is whether there is a fundamental explanation of the substantial use of leverage by hedge funds. Or do hedge funds simply use leverage to inflate returns in good times to fool or in other ways exploit naïve clients? The high leverage of hedge funds also raises welfare questions. In particular whether unregulated hedge funds will choose the socially optimal level of leverage.
We invite articles in response to this challenge. We hope that the research community will rise to the challenge posed by Sheridan Titman. The editorial board of FRL is delighted to be able to partner with Professor Titman in this endeavor.
2nd Challenge
The leverage of hedge funds
Sheridan Titman
Finance Research Letters, Volume 7, Issue 1, March 2010, Pages 2-7
1st Challenge
Patterns in Cross Market Liquidity
Matthew Spiegel
Finance Research Letters, Volume 5, Issue 1, March 2008, Pages 2-10
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