The Fix Is In: Properly Backing out Backfill Bias

Philippe Jorion and Christopher Schwarz

The Review of Financial Studies, 2019, vol. 32, issue 12, 5048-5099

Abstract: Researchers have long known about backfill bias in hedge fund databases. The most common treatments include either retaining all backfilled returns or truncating a fixed number of returns from each return series. However, we show that truncation largely preserves backfilled returns and document that either of these backfill treatments can lead to biased empirical findings, including cross-sectional results. Thus, our findings show that the best practice for empirical tests is to remove returns prior to the listing date. Because most databases do not have listing dates, we propose a novel method to infer unavailable listing dates.Received August 19, 2018; editorial decision December 4, 2018 by Editor Wei Jiang.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhz024 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:32:y:2019:i:12:p:5048-5099.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().