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Hedge funds: Truth and lies on Wall Street

An analyst at a hedge fund says a number of his peers and research firms have begun to use techniques, computer programs and employees from secret service agencies. The aim is to detect when an executive is lying on an analyst call. He says he knows of several hedge funds and research firms that monitor calls using such techniques.

"Detecting lies is not the only red flag to us," he says. Indeed, telling the truth doesn’t necessarily pay off. "If we analyse a call and the executive is telling the truth when he is discussing the firm’s health but six months later he is wrong, that tells us that he doesn’t have a firm grasp on what is going on at the company or industry, and that is a big red flag."