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Mandatory portfolio disclosure, stock liquidity, and mutual fund performance

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  • Agarwal, Vikas
  • Mullally, Kevin Andrew
  • Tang, Yuehua
  • Yang, Baozhong

Abstract

We examine the impact of mandatory portfolio disclosure by mutual funds on stock liquidity and fund performance. We develop a model of informed trading with disclosure and test its predictions using the SEC regulation in May 2004 requiring more frequent disclosure. Stocks with higher fund ownership, especially those held by more informed funds or subject to greater information asymmetry, experience larger increases in liquidity after the regulation change. More informed funds, especially those holding stocks with greater information asymmetry, experience greater performance deterioration after the regulation change. Overall, mandatory disclosure improves stock liquidity but imposes costs on informed investors.

Suggested Citation

  • Agarwal, Vikas & Mullally, Kevin Andrew & Tang, Yuehua & Yang, Baozhong, 2014. "Mandatory portfolio disclosure, stock liquidity, and mutual fund performance," CFR Working Papers 13-04 [rev.], University of Cologne, Centre for Financial Research (CFR).
  • Handle: RePEc:zbw:cfrwps:1304r
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    References listed on IDEAS

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    Cited by:

    1. Ling-Ni Boon & Marie Brière & Carole Gresse & Bas J. M. Werker, 2013. "Regulatory Environment and Pension Investment Performance," Post-Print hal-01492619, HAL.
    2. Jaspersen, Stefan, 2016. "Market power in the portfolio: Product market competition and mutual fund performance," CFR Working Papers 16-07, University of Cologne, Centre for Financial Research (CFR).
    3. repec:eee:jfinec:v:126:y:2017:i:1:p:36-53 is not listed on IDEAS
    4. Agarwal, Vikas & Gay, Gerald D. & Ling, Leng, 2013. "Window dressing in mutual funds," CFR Working Papers 11-07 [rev.2], University of Cologne, Centre for Financial Research (CFR).
    5. repec:wsi:qjfxxx:v:05:y:2015:i:01:n:s2010139215500044 is not listed on IDEAS
    6. Cespa, Giovanni & Colla, Paolo, 2016. "Market Fragmentation, Dissimulation, and the Disclosure of Insider Trades," CEPR Discussion Papers 11690, C.E.P.R. Discussion Papers.
    7. repec:bla:acctfi:v:57:y:2017:i:1:p:113-129 is not listed on IDEAS
    8. Agarwal, Vikas & Mullally, Kevin & Tang, Yuehua & Yang, Baozhong, 2013. "Mandatory portfolio disclosure, stock liquidity, and mutual fund performance," CFR Working Papers 13-04, University of Cologne, Centre for Financial Research (CFR).
    9. repec:dau:papers:123456789/13629 is not listed on IDEAS
    10. Agarwal, Vikas & Gay, Gerald D. & Ling, Leng, 2014. "Window dressing in mutual funds," CFR Working Papers 11-07 [rev.3], University of Cologne, Centre for Financial Research (CFR).
    11. Jaspersen, Stefan & Limbach, Peter, 2017. "Knowing Me, Knowing You? Similarity to the CEO and Fund Managers’ Investment Decisions," CFR Working Papers 17-02, University of Cologne, Centre for Financial Research (CFR).
    12. repec:bla:acctfi:v:57:y:2017:i::p:101-116 is not listed on IDEAS
    13. Jank, Stephan & Roling, Christoph & Smajlbegovic, Esad, 2016. "Flying under the radar: The effects of short-sale disclosure rules on investor behavior and stock prices," Discussion Papers 25/2016, Deutsche Bundesbank.
    14. Didier Georges & Isabelle Girerd-Potin, 2017. "A Discrete-Time State Observer Approach to Discovering Portfolio Holdings," Post-Print hal-01651627, HAL.

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