Survivorship bias in hedge funds leads to misleading investment performance data.
The article "Hedge Funds: The Living and the Dead" looks at how hedge fund returns can be misleading due to survivorship bias. The researchers compared two big databases and found that the bias is over 2% per year. Different investment styles have different biases. Funds often disappear due to poor performance. There are significant differences in returns, fund characteristics, and investment styles between the databases. Reported returns may not match actual changes in fund value, which can explain differences in returns.