On the Problem of the Hedgeless Hedgefunds of Sleepy Hollow: An Evolutionary Stable Solution in an Open Letter to Kenneth Griffin

Funk, Matt (2009): On the Problem of the Hedgeless Hedgefunds of Sleepy Hollow: An Evolutionary Stable Solution in an Open Letter to Kenneth Griffin.

Abstract

This discourse explores and illuminates a fundamental problem, the Achilles' heel, which dominates the hedgefund industry: namely, that hedgefunds no are not positioned to accomplish what they were designed to do: namely, hedge against catastrophic loss in the financial markets. Contemporary fund strategies where built upon random-walk, efficient market theories which are now well-known to be false, thus our present dilemma. This discourse tables the Evolutionary Stable Strategy, for prospective hedgefund investors which, essentially, follows the dominant strategy outlined by Smith in 1776. Our discourse also highlights the dimly recognized difference between internal and external financial shocks, as well as several key points regarding economic methodology.

• Item Type: MPRA Paper
• Language: English
• Keywords: hedgefunds; evolutionary stable strategy; problem of induction; kenneth griffin; george soros; karl popper; clive granger; adam smith; ted turner; catastrophic risk; external shocks; internal shocks; citadel investments; hawaii; rangelands; ranch economics; david hume
• Subjects: F - International Economics > F0 - General > F02 - International Economic Order and Integration; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z10 - General; H - Public Economics > H5 - National Government Expenditures and Related Policies > H56 - National Security and War

References

Fuller, S. (2003). Kuhn vs. Popper.

Hayek, F. (1974a). Hayek Sveriges Riksbank Prize Banquet Speech, 1974

- - - . (1974b). The Pretense of Knowledge

Lakatos, I. (1978). �alFsificationism and the Methodology of Scientific Research Programmes�.

Popper, K. (1999). In Search of a Better World.

- - - . (1982). Introduction to Realism and the Aim of Science (1956).

Sokal, A. (1996). Plea for Reason, Evidence and Logic, transcript of an NYU presentation, 30 October 30 1996, reprinted in New Politics 1997

Soros, G. (2008). Statements of George Soros before the U.S. House of Representatives Committee on Oversight and Government Reform, 13 November 2008