Alex Grecu (Analysis Group) Burton G. Malkiel (Princeton University) Atanu Saha (Analysis Group)
Abstract
It is well known that the voluntary reporting of hedge funds may cause biases in estimates of their investment returns. But wide disagreements exist in explaining why hedge funds stop reporting to the datagathering services. Academic studies have suggested that poor or failing funds stop reporting while industry analysts suggest that better performing funds cease reporting because they no longer need to attract new capital. Using the TASS dataset, we find that hedge funds’ returns are significantly worse at the end of their reporting live. We then use survival time analysis techniques to examine the funds’ time to failure and changes in the hazard rate (i.e., the probability of failure) over time. We also estimate the effects of funds’ performance, size, and other characteristics on the hazard rate. Consistent with the finding on funds’ returns at the end of their reporting lives, we find that better performing and larger hedge funds have lower hazard rates.
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Publisher Info
Paper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number
78.