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.
hedge funds, self-reporting, mandatory disclosure, voluntary disclosure, reporting biases, selection biases
Finance and Financial Management
Agarwal, Vikas; Fos, Vyacheslav; and Jiang, Wei.
(2013). Research Collection BNP Paribas Hedge Fund Centre. Management Science
Available at: http://ink.library.smu.edu.sg/bnp_research/19