Do hedge funds strategically misreport their holdings? Evidence from 13F restatements

Abstract

Hedge funds can subsequently amend their originally reported 13F quarterly holdings using restatements. We conduct the first systematic analysis of such filings, which are as common as confidential filings (used by funds to delay holdings disclosures), but affect four times as many stocks. Restated holdings are associated with significant abnormal returns, suggesting that some original holdings are strategically misreported to hide funds’ trading intentions. We construct a return gap measure to gauge the value added by such restatements and find that it predicts future fund performance. Finally, commonly used databases such as Thomson Reuters do not fully adjust for restatements.

Keywords

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