Hidden Survivorship in Hedge Fund Returns

Posted: 16 Apr 2010

See all articles by Rajesh K. Aggarwal

Rajesh K. Aggarwal

Northeastern University

Philippe Jorion

University of California, Irvine - Paul Merage School of Business

Date Written: April 16, 2010

Abstract

This study identifies a previously unreported bias in the TASS database. Owing to a merger with the Tremont database, 60 percent of the funds added to the TASS database between April 1999 and November 2001 are likely to be survivors (i.e., funds that were selected only from funds that were live as of 31 March 1999). The resulting survivorship bias is substantial, averaging more than 5 percent a year. What would normally be termed the backfill period actually represents hidden survivorship. A sorting algorithm to exclude these fund histories is proposed.

Keywords: Alternative Investments, Hedge Funds, Portfolio Management, Alternative Investment Portfolio Management Strategies

Suggested Citation

Aggarwal, Rajesh K. and Jorion, Philippe, Hidden Survivorship in Hedge Fund Returns (April 16, 2010). Financial Analysts Journal, Vol. 66, No. 2, 2010. Available at SSRN: https://ssrn.com/abstract=1591173

Rajesh K. Aggarwal (Contact Author)

Northeastern University ( email )

413 Hayden Hall
360 Huntington Avenue
Boston, MA 02115
United States

Philippe Jorion

University of California, Irvine - Paul Merage School of Business ( email )

Campus Drive
Irvine, CA 92697-3125
United States
949-824-5245 (Phone)
949-824-8469 (Fax)

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