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Hedge Funds: The Living and the Dead

Published online by Cambridge University Press:  06 April 2009

Bing Liang
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Abstract

In this paper, I examine survivorship bias in hedge fund returns by comparing two large databases. I find that the survivorship bias exceeds 2% per year. Results of survivorship bias by investment styles indicate that the biases are different across styles. I reconcile the conflicting results about survivorship bias in previous studies by showing that the two major hedge fund databases contain different amounts of dissolved funds. Empirical results show that poor performance is the main reason for a fund's disappearance. Furthermore, I find that there are significant differences in fund returs, inception date, net assets value, incentive fee, management fee, and investment styles forthe 465 common funds covered by both databases. Mismatching between reported returns andthe percentage change in NAVs can partially explain the differences in returns.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 35 , Issue 3 , September 2000 , pp. 309 - 326
Copyright
Copyright © School of Business Administration, University of Washington 2000

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Footnotes

*

Weatherhead School of Management, Case Western Reserve University, Cleveland, OH 44106. I thank Stephen Brown (the editor), Anurag Gupta, David Hsieh (the referee), Ji-Chai Lin, Tim Loughran, Ranga Narayanan, Ajai Singh, Sam Thomas, and seminar participants at Case Association International for helpful comments. The paper was supported by a research grant from the Weatherhead School of Management at Case Western Reserve University. I am grateful of Hedge Fund Research, Inc. and TASS Management Limited for providing the data.

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