Abstract

http://ssrn.com/abstract=1108310
 


 



Fund Liquidation, Self-Selection and Look-Ahead Bias in the Hedge Fund Industry


Jenke Ter Horst


Tilburg University - Center for Economic Research (CentER)

Marno Verbeek


Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

May 2007

Review of Finance, Vol. 11, pp. 605-632, May 2007

Abstract:     
A wide range of empirical biases hampers hedge fund databases. In this paper we focus upon survival-related biases and disentangle look-ahead biases due to self-selection of funds and due to fund termination. Self-selection arises because funds voluntarily report their information to data vendors and may decide to stop doing so. By extending existing methodology, we analyze persistence in hedge fund performance over the period 1994-2000, taking into account the above biases. The results show that look-ahead biases due to liquidation and self-selection enforce each other and may lead to overestimating expected returns by as much as 8% per year. Overall, the results are consistent with positive persistence in hedge fund returns at horizons of two and four quarters.

Keywords: hedge funds, performance persistence, look-ahead bias, fund survival

JEL Classification: G11, G23, G14

Accepted Paper Series





Not Available For Download

Date posted: March 20, 2008  

Suggested Citation

ter Horst, Jenke and Verbeek, Marno, Fund Liquidation, Self-Selection and Look-Ahead Bias in the Hedge Fund Industry (May 2007). Review of Finance, Vol. 11, pp. 605-632, May 2007. Available at SSRN: http://ssrn.com/abstract=1108310

Contact Information

Jenke R. Ter Horst
Tilburg University - Center for Economic Research (CentER) ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Marno Verbeek (Contact Author)
Erasmus University - Rotterdam School of Management ( email )
P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)
HOME PAGE: http://www.rsm.nl/mverbeek
Erasmus Research Institute of Management (ERIM)
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Netspar
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Feedback to SSRN


Paper statistics
Abstract Views: 458

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.344 seconds