Abstract
This chapter describes the databases that are used in the empirical analysis, the biases inherent in these databases, and the types of indices that the databases provide. First, we mention the merits of commercial hedge fund databases and the difficulties of constructing indices from individual hedge fund data. We also discuss potential data biases such as the selection bias, survivorship bias, backfill bias, and sample selection bias. Second, we provide information about our data providers and the types of indices that they make available. Special emphasis is given to the distinction between noninvestable and investable indices. Finally, we talk about the characteristics of the return distributions of all hedge fund indices under consideration and present detailed summary statistics as well as time-series performance graphs.
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