Out of the dark: Hedge fund reporting biases and commercial databases

Adam L. Aiken, Christopher P. Clifford, Jesse Ellis

Research output: Contribution to journalArticlepeer-review

58 Scopus citations

Abstract

We examine the potential for selection bias in voluntarily reported hedge fund performance data. We construct a set of hedge fund returns that have never been reported to a commercial hedge fund database. These returns allow a direct comparison of performance between funds that choose to report to commercial databases and funds that do not. We find that funds that report their performance to commercial databases significantly outperform nonreporting funds. Our results suggest that the voluntarily reported performance in commercial databases suffers from a selection bias that may exaggerate the average skill of the universe of hedge fund managers.

Original languageEnglish
Pages (from-to)208-243
Number of pages36
JournalReview of Financial Studies
Volume26
Issue number1
DOIs
StatePublished - Jan 2013

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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