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Out of the Dark: Hedge Fund Reporting Biases and Commercial Databases

Adam L. Aiken

Quinnipiac University

Christopher P. Clifford

University of Kentucky

Jesse A. Ellis

North Carolina State University

July 6, 2012

Review of Financial Studies (Forthcoming)

We examine the potential for selection bias in voluntarily reported hedge fund performance data. We construct a novel 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 non-reporting 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.

Number of Pages in PDF File: 77

Keywords: Hedge Funds, Fund of Funds, Data Biases, Performance Measurement

JEL Classification: G11, G23

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Date posted: December 19, 2009 ; Last revised: September 19, 2012

Suggested Citation

Aiken, Adam L. and Clifford, Christopher P. and Ellis, Jesse A., Out of the Dark: Hedge Fund Reporting Biases and Commercial Databases (July 6, 2012). Review of Financial Studies (Forthcoming). Available at SSRN: http://ssrn.com/abstract=1519914 or http://dx.doi.org/10.2139/ssrn.1519914

Contact Information

Adam L. Aiken
Quinnipiac University ( email )
275 Mt. Carmel Avenue
Hamden, CT 06518
United States
Christopher P. Clifford (Contact Author)
University of Kentucky ( email )
College of Business & Economics
Lexington, KY 40506-0034
United States
859-257-3850 (Phone)
Jesse A. Ellis
North Carolina State University ( email )
Poole College of Management
Campus Box 7229
Raleigh, NC 27695
United States
919-515-9670 (Phone)
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