Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
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Session Chair: Olga Kolokolova, Lancaster University Management School
Presentations
The Missing Data Bias in Modern Fund Portfolio Data
Floris van Dijk1,2
1Banque de France; 2CREST
Discussant: Christian Mücke (ESCP Business School)
Despite significant increases in fund portfolio data coverage in commercial databases, the non-randomness and heterogeneity of voluntary portfolio reporting remains a source of bias. I provide stylized facts on the fund portfolio missingness in these databases, propose a simple decomposition approach of portfolio data absence along reporting participation, frequency, and consistency, and find that these dimensions are governed by distinct underlying mechanisms. Using exhaustive confidential regulatory data, I then revisit established results in prominent areas of the fund literature by conducting empirical analyses on fund manager skill, socially responsible investing, and fund liquidity management. The findings indicate that omitting missing portfolios and non-reporting funds can lead to significantly different conclusions from those obtained when all data is considered. Merging regulatory and commercial databases provide only marginal increases in the sample size since 2010, and conventional imputation methods fall short in dealing with these gaps. I test the performance of simplified imputation approaches based on the algorithm of Bongaerts et al. (2024) that can be run using limited computational resources, and find that they can significantly outperform forward imputation. Future research could use such methods to improve the robustness of empirical findings to the missing data bias.
Are Hedge Funds Too Exposed to Prime Broker Risk?
Magnus Dahlquist1,2, Simon Rottke3, Valeri Sokolovski4
1Stockholm School of Economics; 2CEPR; 3University of Amsterdam; 4University of Alberta
Discussant: René Garcia (Université de Montréal)
Hedge funds and financial intermediaries are interconnected through prime brokerage relationships. Prime brokers are large, systemically important financial intermediaries, and aggregate shocks to them have been shown to be a systematic risk factor. The assets held by hedge funds are naturally exposed to various risk factors, including intermediary risk. We show that the average hedge fund's exposure to systematic financial intermediary risk exceeds the total intermediary risk of its holdings. This heightened exposure is asymmetric, driven solely by negative shocks to financial intermediaries. In contrast, mutual funds and other risk factors show no similar effect. Examining idiosyncratic risk, we show that large adverse shocks to an individual prime broker only impact the performance of hedge funds using that broker exclusively, highlighting diversifiability of idiosyncratic shocks. Our findings underscore the unique risks of hedge funds due to their prime brokerage dependencies.
