Backfill bias - results when missing past return data for a component of an index are filled at the discretion of the component hedge (hedge fund for a hedge fund index) when it joins the index.
There’s the definition from the text but no idea what that means. Can somebody explain.
Best
A component that was not previously part of the index now joins the index…and along with it all it’s history. If the history of the component is also added to the index it creates a bias because that component did not exist within the index previous to the date it joined.
Perfect. Much appreciated. You should’ve wrote the book…haha