| By: |
Agarwal, Vikas;
Mullally, Kevin;
Tang, Yuehua;
Yang, Baozhong |
| Abstract: |
This paper studies the impact of mandatory portfolio disclosure of mutual
funds on the liquidity of disclosed stocks and on fund performance. We
consider a theoretical model of informed trading with different mandatory
disclosure frequencies. Using a regulation change in May 2004 that increased
the frequency of mandatory disclosure, we find evidence consistent with the
model's predictions. First, stocks with higher fund ownership experience a
larger increase in liquidity as compared to other stocks subsequent to the
mandatory increase in disclosure frequency, especially for stocks disclosed by
more informed funds or subject to greater information asymmetry. Second,
better performing funds experience a greater drop in their abnormal
performance following the regulation change, particularly when they hold
stocks with greater information asymmetry or when they take longer to complete
their trades. Taken together, our evidence suggests that mandatory portfolio
disclosure improves market quality by increasing stock liquidity but imposes
costs on informed investors. -- |
| Keywords: |
Portfolio disclosure,Stock liquidity,Mutual funds,Fund performance |
| JEL: |
G14 G23 G28 |
| Date: |
2013 |
| URL: |
http://d.repec.org/n?u=RePEc:zbw:cfrwps:1304&r=mst |