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Performance Evaluation of Hedge Funds withOption based and Buy and Hold StrategiesVikas AgarwalNarayan Y. Naik*Current Version: September 2000JEL Classification: G10, G19____________________________________________* Corresponding author: Narayan Y. Naik, London Business School, Sussex Place, Regent's Park,London NW1 4SA, United Kingdom. E mail: nnaik@london.edu, Tel: +44 20 7262 5050, extension3579 and Fax: +44 20 7724 3317. Vikas Agarwal is the Fauchier Partners’ Scholar in the PhDProgramme (Finance) at the London Business School and Narayan Y. Naik isAsso anc iate Professorof Finance at the London Business School. We would like to thank Ravi Bansal, Richard Brealey,Stephen Brown, Ian Cooper, Elroy Dimson, Fauchier Partners, Lawrence Glosten, WilliamGoetzmann, David Hsieh, Dusan Isakov, Ravi Jagannathan Robe, rt Rice, Stephen Schaefer, RichardTarvin, Pradeep Yadav and participants at the donor seminar at the London Business School, SIRIFconference in Scotland, Inquire-Actuaries seminar and the European Finance Association 2000Meetings in London for many helpful comments and constructive suggestions. Naik is grateful forfunding from Inquire UK and the European Commission's TMR program (network ref.ERBFMRXCT 960054). Vikas Agarwal is grateful for the financial support from British Council’sChevening scholarship, Edward Jones’, Frank Russell’s and Fauchier Partners’ scholarships duringpast three years in the PhD programme. We are grateful to Hedge Fund ...