In this paper, we examine survivorship bias in hedge fund returns by comparing two large databases. We find that the survivorship bias exceeds 2% per year. We reconcile the conflicting results about survivorship bias in previous studies by showing that the two major hedge fund databases contain...

This paper investigates hedge fund performance and risk. The empirical evidence indicates that hedge funds differ substantially from traditional investment vehicles such as mutual funds. The funds with watermarks significantly outperform the funds without watermarks. The average hedge fund...

This paper examines analysts' security recommendations in the quot;Dartboardquot; column of the Wall Street Journal and tests whether the impact on the recommended security prices is temporary or permanent. We document a two-day announcement effect for the experts' stocks, which exhibits mean...

We study the effect of share restrictions on the flow-performance relation of individual hedge funds. Consistent with the predictions of our model, hedge funds exhibit a convex flow-performance relation in the absence of share restrictions, similar to mutual funds. However, in the presence of...

Hedge fund managers are largely free to pursue dynamic trading strategies and standard static performance appraisal is no longer accurate for evaluating hedge funds. Accordingly, this paper presents some new ways of analyzing hedge fund strategies following a dynamic linear regression model....

Using comprehensive quarterly data on hedge fund stock holdings, we study the role of hedge funds in the process of stock price formation. We find that hedge funds tend to hold undervalued stocks, and that both hedge fund ownership and their trades are positively related to the degree of stock...

This paper examines whether self-described market timing hedge funds have the ability to time the U.S. equity market. We propose a new measure for timing return and volatility jointly that relates fund returns to the squared Sharpe ratio of the market portfolio. Using a sample of 221 market...

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 Eacute;-Score to measure hedge fund operational risk. The Eacute;-Score is related to conflict of interest issues, concentrated ownership, and reduced leverage...

Using a complete set of U.S. SEC filing information on hedge funds (Form ADV) and data from the Lipper TASS Hedge Fund Database, the study reported here developed a quantitative model called the Eacute;-score to measure hedge fund operational risk. The Eacute;-score is related to...

Due diligence is an important source of alpha in a well designed hedge fund portfolio strategy. It is generally understood that the high returns possible in investing in hedge funds are somewhat offset by the relative lack of transparency on operational issues. The performance of a diversified...