Hiding Behind the Window Blinds: Strategic Trading under Portfolio Partial Disclosure
75 Pages Posted: 7 Feb 2022 Last revised: 3 Nov 2022
Date Written: January 22, 2022
We study implications of partial versus full disclosure requirements on mutual fund trading and performance, by exploiting a unique hybrid disclosure policy in China, requiring full disclosure at a semi-annual frequency, but only disclosure of top-10 holdings at other quarters. Under partial disclosure, funds benefit from strategically concealing private information. Fund holdings outperform those under full disclosure by 3% over the following three months. Partial disclosure reduces window dressing distortions, doesn’t deteriorate market liquidity nor fund portfolios’ risk profiles. Together, the evidence suggests that not only a disclosure requirement, but its extent, is an important dimension of policy to consider.
Keywords: Mutual Fund, Strategic Trading, Concealing Behavior, Window Dressing, Portfolio Disclosure Policy
JEL Classification: G23
Suggested Citation: Suggested Citation