http://allaboutalpha.com/blog/2007/03/15/professor-harry-kat-responds-to-edhec-study-on-hedge-fund-replication/ A finance blog about hedge funds, portable alpha and alternative investing. Mon, 13 Feb 2012 11:26:54 +0000 http://wordpress.org/?v=abc hourly 1 http://allaboutalpha.com/blog/2007/03/15/professor-harry-kat-responds-to-edhec-study-on-hedge-fund-replication/comment-page-1/#comment-1656 tlaing Fri, 16 Mar 2007 15:30:39 +0000 http://allaboutalpha.com/blog/2007/03/15/professor-harry-kat-responds-to-edhec-study-on-hedge-fund-replication/#comment-1656 I enjoyed the good professor´s response to his critics, especially this: "...Closer to home, Leo suggests they build a Rolls Royce for themselves. Chris agrees and offers his tools and his garage as a workshop. The two go to work and by the evening (!!) their car is finished. Indeed, it looks very much like the real thing." Unfortunately, my suspicion is that Leo and Chris do not know the first thing about copying the object of their attention. Professor Kat´s story is fun reading but has one minor flaw: the gentlemen from EDHEC likely know a little more about their subject than do Leo and Chris (and, one imagines, took a little longer to prepare their work). Kat´s defence of his black box ("So how can one evaluate something of which one doesn’t know what is going on inside? I think that’s simple - try it out and examine the results themselves rather than the methodology.") has a wonderful counterpoint in Jack Schwager´s comments from the following day: “Every problem, I don’t care what it is †whether it’s a fraud, blowup or whatever, is caused by one thing: a lack of transparency.” As usual, Chris, great food for thought. I enjoyed the good professor´s response to his critics, especially this:
“…Closer to home, Leo suggests they build a Rolls Royce for themselves. Chris agrees and offers his tools and his garage as a workshop. The two go to work and by the evening (!!) their car is finished. Indeed, it looks very much like the real thing.”
Unfortunately, my suspicion is that Leo and Chris do not know the first thing about copying the object of their attention. Professor Kat´s story is fun reading but has one minor flaw: the gentlemen from EDHEC likely know a little more about their subject than do Leo and Chris (and, one imagines, took a little longer to prepare their work).
Kat´s defence of his black box (“So how can one evaluate something of which one doesn’t know what is going on inside? I think that’s simple – try it out and examine the results themselves rather than the methodology.”) has a wonderful counterpoint in Jack Schwager´s comments from the following day:
“Every problem, I don’t care what it is †whether it’s a fraud, blowup or whatever, is caused by one thing: a lack of transparency.”
As usual, Chris, great food for thought.

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