Instant History Bias

AAA

DEFINITION of 'Instant History Bias'

An inaccuracy in the appearance of investment fund returns that occurs when only new, successful funds report their numbers while new, unsuccessful funds close and their poor returns aren't factored into an investment manager's or investment type's overall performance record.


Instant history bias, which especially occurs in hedge funds, is also called "backfill bias" because hedge fund managers may choose not report fund performance to a database from the fund's inception, but instead choose to "backfill" the database later when they have established a track record of success with a fund.

INVESTOPEDIA EXPLAINS 'Instant History Bias'

Other types of bias that exist in hedge fund reporting include survivorship bias (the inaccurate appearance of high returns because poorly performing funds are closed and their returns are not counted) and non-reporting bias (the inaccurate reporting of overall returns because some funds, probably poorly performing ones, decline to report their returns).





These types of bias may make hedge funds appear to be a better-performing asset type than they really are, because hedge fund managers can choose whether to report the performance of their funds.

RELATED TERMS
  1. Survivorship Bias Risk

    The possibility that an investor will make a misguided investment ...
  2. Hedge Fund Manager

    The individual who oversees and makes decisions about the investments ...
  3. Bias

    Biases are human tendencies that lead us to follow a particular ...
  4. Reverse Survivorship Bias

    The tendency for low performers to remain in the game, while ...
  5. Average Annual Return - AAR

    A percentage figure used when reporting the historical return, ...
  6. Hedge Fund

    An aggressively managed portfolio of investments that uses advanced ...
Related Articles
  1. Mutual Funds & ETFs

    Published Mutual Fund Returns Not Always ...

  2. Economics

    The ABCs Of Stock Indexes

  3. Mutual Funds & ETFs

    How do traders use the ABX index?

  4. Investing Basics

    Hedge Fund Fees: Exotic Expenses

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center