Testing the Effect of Portfolio Holdings Disclosure in an Environment Absent of Mandatory Disclosure

32 Pages Posted: 23 May 2014 Last revised: 12 Mar 2015

See all articles by Zhe Chen

Zhe Chen

University of New South Wales (UNSW); Acadian Asset Management; Centre for International Finance and Regulation (CIFR)

David R. Gallagher

RoZetta Institute; Bond University

Adrian D. Lee

Deakin University - Department of Finance (Property and Real Estate)

Date Written: October 7, 2014

Abstract

An effective portfolio disclosure regime must balance both its costs and benefits across the entire financial services industry. This study examines a number of disclosure regimes with respect to accuracy and susceptibility to copycat behaviour in an environment absent of mandatory disclosure. We find that periodic portfolio disclosure tends to underestimate true excess performance as well as idiosyncratic risk in top-quartile fund managers, with longer inter-reporting intervals tending to result in greater differences. Copycat funds following the disclosed holdings of top-tier managers significantly underperform, while copycats following bottom-tier managers significantly outperform. Our findings suggest that periodic reporting at monthly intervals or longer would not affect fund alpha generation.

Keywords: Managed funds, portfolio holdings disclosure, copycat funds

JEL Classification: G23

Suggested Citation

Chen, Zhe and Chen, Zhe and Gallagher, David R. and Lee, Adrian D., Testing the Effect of Portfolio Holdings Disclosure in an Environment Absent of Mandatory Disclosure (October 7, 2014). CIFR Paper No. 019/2014, Available at SSRN: https://ssrn.com/abstract=2441049 or http://dx.doi.org/10.2139/ssrn.2441049

Zhe Chen (Contact Author)

Acadian Asset Management ( email )

260 Franklin Street
Boston, MA 02110
United States

University of New South Wales (UNSW)

Kensington
High St
Sydney, NSW 2052
Australia

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

David R. Gallagher

RoZetta Institute ( email )

Sydney

HOME PAGE: http://supercrc.com

Bond University ( email )

Gold Coast, QLD 4229
Australia

Adrian D. Lee

Deakin University - Department of Finance (Property and Real Estate) ( email )

70 Elgar Road
Melbourne, VIC 3125
Australia

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