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Adam Aiken’s research cited in FundFire

The assistant professor of finance was recently cited for his research on the hedge fund industry.

Research co-authored by Adam Aiken, assistant professor of finance in the Martha and Spencer Love School of Business, was cited in a February 17, 2016 article in FundFire, an online publication providing asset management news to more than 80,000 readers. 

The article, titled “Hedge Fund ‘Winners’ Inflate Database Returns: Study,” refers to research Aiken co-authored with Christopher P. Clifford, assistant professor of finance at the University of Kentucky, and Jesse Ellis, assistant professor of finance at North Carolina State University. Their academic paper, titled “Out of the Dark: Hedge Fund Reporting Biases and Commercial Databases,” was published in The Review of Financial Studies in January 2013. It revealed the hedge fund industry may be performing worse than the average results generated by managers listed in commercial databases.

In relation to the study, the article provided thoughts related to the topic of study, quoting Peter Laurelli, global head of research at eVestment, Sheryl Mejia, a partner at consulting firm Decagon Advisors, and Abby Flamhol, co-founder of Worth Venture Partners and David Russell, head of manager research at consultant Investment Performance Services.

The paper’s abstract reads:

“We examine the potential for selection bias in voluntarily reported hedge fund performance data. We construct a set of hedge fund returns that have never been reported to a commercial hedge fund database. These returns allow a direct comparison of performance between funds that choose to report to commercial databases and funds that do not. We find that funds that report their performance to commercial databases significantly outperform nonreporting funds. Our results suggest that the voluntarily reported performance in commercial databases suffers from a selection bias that may exaggerate the average skill of the universe of hedge fund managers.”

Olivia Hays,
3/14/2016 2:30 PM