Some argue that abnormally high returns of hedge funds are tainted by ________, which arises when unsuccessful funds cease operations, leaving only successful ones.

Question

Quizplus · Accepted Answer

Survivorship bias is the tendency to focus on the successful funds and ignore the unsuccessful ones, which often go out of business. This creates a skewed perspective on the average returns of hedge funds because the average is calculated only from surviving funds, which are typically the more successful ones. This can create the illusion of higher returns.

Some Argue That Abnormally High Returns of Hedge Funds Are