We explore a new dimension of fund managers' timing ability by examining whether they can time market liquidity through adjusting their portfolios' market exposure as aggregate liquidity conditions change. Using a large sample of hedge funds, we find strong evidence of liquidity timing. A...

This paper studies operational risk in the hedge fund industry using due diligence reports. Many funds suffer from operational problems, including limited disclosure of legal and regulatory issues. We use direct evidence of inadequate or failed internal processes to derive a canonical...

Mandatory disclosure is a regulatory tool intended to allow market participants to assess operational risk. We examine the value of disclosure through the controversial SEC requirement, since overturned, which required major hedge funds to register as investment advisors and file Form ADV...

Using a complete set of the SEC filing information on hedge funds (Form ADV) and the TASS data, we develop a quantitative model called the ?-Score to measure hedge fund operational risk. The ?-Score is related to conflict of interest issues, concentrated ownership, and reduced leverage in the...

Due to imperfect transparency and costly auditing, trust is an essential component of financial intermediation. In this paper we study a sample of 444 due diligence (DD) reports from a major hedge fund DD firm. A routine feature of due diligence is an assessment of integrity. We find that...