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More informative disclosures, less informative prices? Portfolio and price formation around quarter-ends

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  • Gormley, Todd A.
  • Kaplan, Zachary
  • Verma, Aadhaar

Abstract

Fund trades and stock prices vary systematically with the quarterly reporting cycle. Funds accelerate trades that complete the building of existing positions at quarter-end but delay trades that initiate the building of new positions until the start of the new quarter. Evidence suggests these trade dynamics are driven by a dual desire to make disclosures more informative about future holdings but avoid disclosing incomplete positions. Consistent with disclosure-based motives unrelated to new information about intrinsic values driving these quarterly trade dynamics, both stock price informativeness and commissions paid by funds drop at quarter-end.

Suggested Citation

  • Gormley, Todd A. & Kaplan, Zachary & Verma, Aadhaar, 2022. "More informative disclosures, less informative prices? Portfolio and price formation around quarter-ends," Journal of Financial Economics, Elsevier, vol. 146(2), pages 665-688.
  • Handle: RePEc:eee:jfinec:v:146:y:2022:i:2:p:665-688
    DOI: 10.1016/j.jfineco.2021.10.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Fund disclosures; Portfolio formation; Market efficiency; Quarter-ends;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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