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Change You Can Believe In? Hedge Fund Data RevisionsAndrew J. PattonDuke University - Department of Economics; University of Oxford - Oxford-Man Institute of Quantitative Finance Tarun RamadoraiUniversity of Oxford - Said Business School; University of Oxford - Oxford-Man Institute of Quantitative Finance; Centre for Economic Policy Research (CEPR) Michael StreatfieldUniversity of Oxford - Said Business School; Oxford-Man Institute of Quantitative Finance March 22, 2013 Abstract: We analyze the reliability of voluntary disclosures of financial information, focusing on widely-employed publicly available hedge fund databases. Tracking changes to statements of historical performance recorded at different points in time between 2007 and 2011, we find that historical returns are routinely revised. These revisions are not merely random or corrections of earlier mistakes; they are partly forecastable by fund characteristics. Moreover, funds that revise their performance histories significantly and predictably underperform those that have never revised, suggesting that unreliable disclosures constitute a valuable source of information for current and potential investors. These results speak to current debates about mandatory disclosures by financial institutions to market regulators.
Number of Pages in PDF File: 87 Keywords: hedge funds, disclosure, asymmetric information, finance regulation, performance JEL Classification: D82, G14, G23, L15 working papers seriesDate posted: September 30, 2011 ; Last revised: March 26, 2013Suggested CitationContact Information
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