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Why Do Hedge Funds Avoid Disclosure? Evidence from Confidential 13F Filings

47 Pages Posted: 15 Mar 2012 Last revised: 4 Sep 2013

George O. Aragon

Arizona State University (ASU) - Finance Department

Michael G. Hertzel

Arizona State University (ASU) - Finance Department

Zhen Shi

Georgia State University

Date Written: June 1, 2012

Abstract

We study a sample of Form 13F filings where fund advisors seek confidential treatment for some, or all, of their 13(f)-reportable positions. Consistent with the hypothesis that managers seek confidentiality to protect proprietary information we find that confidential positions earn positive and significant abnormal returns over the post-filing confidential period. We also find that managers are more likely to seek confidential treatment of illiquid positions that are more susceptible to front-running. Overall, our analysis highlights important benefits of reduced disclosure that are relevant to the current policy debate on hedge fund transparency.

Keywords: Disclosure, Hedge Fund Performance, Financial Regulation

JEL Classification: G28

Suggested Citation

Aragon, George O. and Hertzel, Michael G. and Shi, Zhen, Why Do Hedge Funds Avoid Disclosure? Evidence from Confidential 13F Filings (June 1, 2012). AFA 2011 Denver Meetings Paper; Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1569736 or http://dx.doi.org/10.2139/ssrn.1569736

George O. Aragon

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Michael G. Hertzel

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-6869 (Phone)
602-965-8539 (Fax)

Zhen Shi (Contact Author)

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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