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Change You Can Believe In? Hedge Fund Data Revisions

87 Pages Posted: 30 Sep 2011 Last revised: 30 Jun 2013

Andrew J. Patton

Duke University - Department of Economics

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR)

Michael Streatfield

University of Oxford - Said Business School; Oxford-Man Institute of Quantitative Finance

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

Keywords: hedge funds, disclosure, asymmetric information, finance regulation, performance

JEL Classification: D82, G14, G23, L15

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

Andrew J. Patton

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

HOME PAGE: http://econ.duke.edu/~ap172/

Tarun Ramadorai (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

HOME PAGE: http://www.tarunramadorai.com

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Michael Streatfield

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Oxford-Man Institute of Quantitative Finance

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

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