"Inferring Reporting Biases in Hedge Fund Databases from Hedge Fund Equity Holdings"

Vikas Agarwal, Vyacheslav Fos, Wei Jiang

Working Paper, 2010

Publication type: Working paper

Research Archive Topic: Business Economics and Public Policy, Corporate Finance

Abstract

This paper is a first study that formally analyzes the degree of the self-reporting bias in the hedge funds databases by exploring the quarterly equity holdings of a complete list of hedge fund companies that file the Form 13F to the SEC between 1980 and 2008 and self-report their performance to a union of five major hedge fund databases. We find that the propensity to self-report is consistent with the tradeoffs between the benefits (access to prospective investors) and costs (revealing trading secrecy and losing flexibility in selective marketing) of self-reporting. Though self-reporting and non-reporting funds do not differ significantly in return performance, reporting funds experience substantial deterioration in performance after both the reporting initiation and termination dates.

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