Hiding Behind the Window Blinds: Strategic Trading under Portfolio Partial Disclosure

75 Pages Posted: 7 Feb 2022 Last revised: 3 Nov 2022

See all articles by Ron Kaniel

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Jennifer (Jie) LI

INSEAD; Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Donghui Shi

Shanghai Stock Exchange

Qi Zhang

Shanghai Jiao Tong University (SJTU)

Date Written: January 22, 2022

Abstract

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

Kaniel, Ron and LI, Jennifer (Jie) and Shi, Donghui and Zhang, Qi, Hiding Behind the Window Blinds: Strategic Trading under Portfolio Partial Disclosure (January 22, 2022). Available at SSRN: https://ssrn.com/abstract=4014878 or http://dx.doi.org/10.2139/ssrn.4014878

Ron Kaniel

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )

London
United Kingdom

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

Donghui Shi

Shanghai Stock Exchange ( email )

Shanghai 200120
China

Qi Zhang

Shanghai Jiao Tong University (SJTU) ( email )

China

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