Out of every five hedge fund managers, one is prone to fibbing, according to research from NYU's Stern School of Business. This is likely to pour salt in the wound of an industry that's been in rough shape for the past year. And, it'll probably add a bit more pressure for transparency.

The NYU report uses data from 444 due diligence reports that investors commissioned from 2003 to 2008. The research team put the information against the test of reality to see where the differences are. The most common stretch of the truth was the amount of their own money the managers put into their hedge funds, fund performance and regulatory and legal histories. One fund inflated its assets under management by $300 million, while another wasn't up front about one of its partner's legal records (he had stolen a Chinese junk).

If you've been through high school, you know how peers can pressure you to do things you might ordinarily avoid. This came to mind while reading two articles in yesterday's Wall Street Journal. The common theme was how individual actors in markets -- whether top traders or big banks -- are acutely influenced in their behavior by what they observe their peers doing.

In the first, Mark McGoldrick decided to leave [subscription required] the Goldman Sachs Group (NYSE: GS) because he felt his $70 million in 2006 compensation was not enough for the $4 billion in profit he contributed to the firm. He wanted what other hedge fund players were making -- $1.2 billion for his group (representing the typical compensation of a hedge fund -- a 2% management fee plus 20% of the profits). Instead, Goldman paid his group a mere $500 million (less than 15% of his group's profits).

Similarly, the Fed spent a significant amount of time trying to get banks to use its Discount window to take out loans after Friday's 50 basis point rate cut. The Fed feared that banks would not use the Discount window because it made them look weak in the eyes of their peers.

It remains to be seen whether the Fed's effort to make peer pressure work will breath life into borrowing from its Discount window. But McGoldrick has already left Goldman to do -- what else? -- start his own hedge fund so he can keep up with his peers.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Goldman.

Quite a while ago, Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne concluded that hedge fund managers were colluding with journalists and finance writers to manipulate stock prices of public companies. Byrne was vilified a bit for that stance, but now he's being vindicated a little with support from some surprising areas.

Both Jim Cramer and even reports from Bloomberg News state that there is indeed market manipulation going on to this day in commonplace fashion. I still can't get over why anyone would base an investing strategy (outside of day trading) on Cramer's Mad Money unless they are mesmerized by his showmanship, but I digress. The guy is smart, but there are plenty of other portfolios with better returns. Do your own research.

Anyway, Cramer's allegation that the financial press is easily duped by short sellers and hedge funds makes sense to me if you look at the daily activity levels and know precisely what to monitor to see patterns. Cramer also stated that federal regulators aren't smart enough to stop it -- another thing I agree with him on. The markets weren't set up for this kind of nonsense, but if there is short-term money to be made and the power of regulation is turtle-slow, you can bet people will be acclimating to it like bugs to a porch light.

Perhaps Byrne was right all along, as he did accuse a number of investment bankers, financial journalists and hedge fund managers of collaborating to ruin the reputations of companies in order to profit when their stock prices tumbled. It may be time for the federal henchmen to enter the picture and let Byrne finally bask in what he's wanted for quite some time.