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Effective delays in portfolio disclosure


  • Seung Hee Choi
  • Maneesh Chhabria


Purpose - The timeliness of portfolio holdings information disclosure has been of interest among regulators, academics and practitioners since the Investment Company Act of 1940. The Securities Exchange Commission has been trying to strike a balance between investors' interest in timely disclosure and the potential costs associated with revealing the strategies of investment managers. The purpose of this paper is to investigate whether current rules regarding the delay in disclosure adequately protect investors, and prevent the formation of copycat portfolios that can profit from the research of the original portfolio manager. Design/methodology/approach - The paper examine the effectiveness of different delays (30, 60 or 90 days) in disclosure of holdings for a sample of large-cap, actively-managed mutual funds. Copycat portfolios are constructed based on the holdings of the original portfolios, and their returns compared against the returns (net of expenses) of the original portfolios over the corresponding time frames. Findings - The results indicate that the current delay of 60 days is sufficient to prevent such free-riding; however, shortening the delay to 30 days would adversely affect mutual fund investors. Originality/value - The paper aims to provide an answer to those debates on the effective delays in portfolio disclosure among academics and practitioners based on quantitative evidence. It also contributes to leave a guideline for regulators since the patterns of over- or under-performance of the original portfolio returns

Suggested Citation

  • Seung Hee Choi & Maneesh Chhabria, 2012. "Effective delays in portfolio disclosure," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(2), pages 196-211, May.
  • Handle: RePEc:eme:jfrcpp:v:20:y:2012:i:2:p:196-211

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    References listed on IDEAS

    1. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992. "The impact of institutional trading on stock prices," Journal of Financial Economics, Elsevier, vol. 32(1), pages 23-43, August.
    2. Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2008. "Unobserved Actions of Mutual Funds," Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2379-2416, November.
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    4. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    5. Jonathan B. Berk & Richard C. Green, 2004. "Mutual Fund Flows and Performance in Rational Markets," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1269-1295, December.
    6. Keim, Donald B. & Madhavan, Ananth, 1997. "Transactions costs and investment style: an inter-exchange analysis of institutional equity trades," Journal of Financial Economics, Elsevier, vol. 46(3), pages 265-292, December.
    7. Coval, Joshua & Stafford, Erik, 2007. "Asset fire sales (and purchases) in equity markets," Journal of Financial Economics, Elsevier, vol. 86(2), pages 479-512, November.
    8. Frank, Mary Margaret & Poterba, James M & Shackelford, Douglas A & Shoven, John B, 2004. "Copycat Funds: Information Disclosure Regulation and the Returns to Active Management in the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 515-541, October.
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