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

63 Pages Posted: 7 Feb 2022 Last revised: 14 Feb 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 disclosure on mutual fund trading and performance by exploiting a unique hybrid disclosure policy in the Chinese stock market, requiring full disclosure at a semi- annual frequency but only disclosure of top-10 holdings at a quarterly frequency, and utilizing a dataset covering the entire daily trading records of all mutual funds in Shanghai Stock Exchange. Funds benefit from partial disclosure by strategically concealing private information and reducing window dressing efforts. Fund holdings under partial disclosure outperform those under full disclosure by 3% over the following three months. Partial disclosure does not deteriorate market liquidity and risk profiles of funds’ portfolios. Together the evidence suggests that the extent of fund portfolio disclosure is an important dimension in disclosure policy.

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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