87 Pages Posted: 30 Sep 2011 Last revised: 30 Jun 2013
Date Written: March 22, 2013
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.
Keywords: hedge funds, disclosure, asymmetric information, finance regulation, performance
JEL Classification: D82, G14, G23, L15
Suggested Citation: Suggested Citation
Patton, Andrew J. and Ramadorai, Tarun and Streatfield, Michael, Change You Can Believe In? Hedge Fund Data Revisions (March 22, 2013). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1934543 or http://dx.doi.org/10.2139/ssrn.1934543
By Bing Liang