Strategic Delays and Clustering in Hedge Fund Reported Returns

George Aragon, Vikram Nanda

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

We use a novel database to study the timeliness of hedge fund monthly performance disclosures. Managers engage in strategic timing: poor monthly returns are reported with delay, sometimes clustered with stronger subsequent performance, suggestive of “performance smoothing.” We posit that propensity to delay could reveal operational risk and/or poor managerial quality. Consistent with this, a portfolio strategy that buys (sells) funds with historically timely (untimely) reporting delivers 3% annual-style-adjusted returns. Investor flows are lower following reporting delays, although there are potential benefits to managers from delaying reporting when performance is sufficiently poor. We conclude that timely disclosure is an important consideration for hedge fund managers and investors.

Original languageEnglish (US)
Pages (from-to)1-35
Number of pages35
JournalJournal of Financial and Quantitative Analysis
DOIs
StateAccepted/In press - Jan 25 2017

Fingerprint

Hedge funds
Clustering
Disclosure
Investors
Managers
Data base
Fund managers
Operational risk
Smoothing
Portfolio strategy
Timeliness
Hedge fund performance
Propensity

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Strategic Delays and Clustering in Hedge Fund Reported Returns. / Aragon, George; Nanda, Vikram.

In: Journal of Financial and Quantitative Analysis, 25.01.2017, p. 1-35.

Research output: Contribution to journalArticle

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