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
Date Written: July 12, 2012
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: Suggested Citation