TY - JOUR T1 - Measuring the Quality of Hedge Fund Data JF - The Journal of Alternative Investments SP - 26 LP - 40 DO - 10.3905/JAI.2009.12.2.026 VL - 12 IS - 2 AU - Daniel Straumann Y1 - 2009/09/30 UR - https://pm-research.com/content/12/2/26.abstract N2 - This article discusses and investigates the quality of hedge fund databases. The main goal of this article is to increase awareness of the practical limitations of hedge fund data and devise a tool for the quantification of financial data quality. The accuracy of hedge fund return data is taken for granted in most empirical studies. It is shown, however, that hedge fund return time series often exhibit peculiar and most likely “man-made” patterns, which are worth examining. A statistical testing methodology that can detect these patterns is developed. Based on these tests, a data quality score for rating hedge funds and, more generally, hedge fund databases is devised. An empirical study is conducted to show how this data quality score can be used when exploring a hedge fund database. This can confirm many of the insights by Liang [2003] concerning the quality of hedge fund return data using a different methodology. In a final step the authors attempt to estimate the impact of imperfect data on performance measurement by defining a “data quality bias.”TOPICS: Real assets/alternative investments/private equity, quantitative methods, performance measurement ER -