New Economics Papers
on Market Microstructure
Issue of 2013‒07‒20
two papers chosen by
Thanos Verousis

  1. Mandatory portfolio disclosure, stock liquidity, and mutual fund performance By Agarwal, Vikas; Mullally, Kevin; Tang, Yuehua; Yang, Baozhong
  2. In search of concepts: The effects of speculative demand on returns and volume By ap Gwilym, Owain; Wang, Qingwei; Hasan, Iftekhar; Xie, Ru

  1. 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
  2. By: ap Gwilym, Owain (Bangor Business School); Wang, Qingwei (Bangor Business School); Hasan, Iftekhar (Fordham University and Bank of Finland); Xie, Ru (Bangor Business School)
    Abstract: Using a novel proxy of investors’ speculative demand constructed from online search interest in “concept stocks”, we examine how speculative demand affects the returns and trading volume of Chinese stock indices. We find that returns and trading volume increase with the contemporaneous speculative demand. In addition, the high speculative demand causes lower near future returns, while recent high past returns cause the high speculative demand. Moreover, the speculative demand explains more variation in returns and trading volume of A shares (more populated by retail investors) than B shares (less populated by retail investors). Our findings support the attention theory of Barber and Odean (2008).
    Keywords: investor attention; speculative demand; concept stock; market returns; trading volume
    JEL: G12 G14
    Date: 2013–05–28

This issue is ©2013 by Thanos Verousis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.