To attract new clients hedge funds often select reporting periods which show abnormally high returns.This is called __________.

Question

Quizplus · Accepted Answer

The practice of selecting reporting periods to show abnormally high returns is called backfill bias. Choice A (long/short bias) refers to a bias towards long or short positions in a fund's portfolio. Choice B (survivorship bias) refers to the bias in data caused by only considering the surviving funds that have performed well, while ignoring those that have failed. Choice D (incentive bias) is not a commonly used term in finance and is not relevant to this context.

To Attract New Clients Hedge Funds Often Select Reporting Periods