Inferring Reporting-Related Biases in Hedge Fund Databases from Hedge Fund Equity Holdings

Management Science, Forthcoming

33 Pages Posted: 18 Jan 2010 Last revised: 13 Jul 2014

Vikas Agarwal

Georgia State University; University of Cologne - Centre for Financial Research (CFR)

Vyacheslav Fos

Boston College - Department of Finance

Wei Jiang

Columbia Business School - Finance and Economics

Date Written: July 12, 2012

Abstract

This paper formally analyzes the biases related to self-reporting in hedge fund databases by matching the quarterly equity holdings of a complete list of 13F-filing hedge fund companies to the union of five major commercial databases of self-reporting hedge funds between 1980 and 2008. We find that funds initiate self-reporting after positive abnormal returns which do not persist into the reporting period. Termination of self-reporting is followed by both return deterioration and outflows from the funds. The propensity to self-report is consistent with the trade-offs between the benefits (e.g., access to prospective investors) and costs (e.g., partial loss of trading secrecy and flexibility in selective marketing). Finally, returns of self-reporting funds are higher than that of non-reporting funds using characteristic-based benchmarks. However, the difference is not significant using alternative choices of performance measures.

Keywords: hedge funds, mandatory and voluntary disclosure, selection and reporting biases

JEL Classification: G20, G23, G29

Suggested Citation

Agarwal, Vikas and Fos, Vyacheslav and Jiang, Wei, Inferring Reporting-Related Biases in Hedge Fund Databases from Hedge Fund Equity Holdings (July 12, 2012). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1536886 or http://dx.doi.org/10.2139/ssrn.1536886

Vikas Agarwal

Georgia State University ( email )

35 Broad Street,
Suite 1221
Atlanta, GA 30303-3083
United States
404-413-7326 (Phone)
404-413-7312 (Fax)

HOME PAGE: http://www.gsu.edu/~fncvaa

University of Cologne - Centre for Financial Research (CFR)

Albertus-Magnus Platz
Cologne, 50923
Germany

Vyacheslav Fos (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Wei Jiang

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

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