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

Vikas Agarwal (), Vyacheslav Fos () and Wei Jiang ()
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Vikas Agarwal: J. Mack Robinson College of Business, Georgia State University, Atlanta, Georgia 30303; and Centre for Financial Research, University of Cologne, 50923 Cologne, Germany
Vyacheslav Fos: College of Business, University of Illinois at Urbana--Champaign, Champaign, Illinois 61820
Wei Jiang: Graduate School of Business, Columbia University, New York, New York 10027

Management Science, 2013, vol. 59, issue 6, 1271-1289

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 that 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 nonreporting funds using characteristic-based benchmarks. However, the difference is not significant using alternative choices of performance measures. This paper was accepted by Brad Barber, finance.

Keywords: hedge funds; mandatory and voluntary disclosure; reporting and selection biases (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (55)

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