Partial portfolio disclosure, investors’ attention, and window dressing
I show that the disclosure of mutual funds’ holdings significantly affects investors’ investment decisions. As most mutual fund websites, advertisements, and fund-trading platforms only disclose a fund’s 10 largest holdings (top-10), this study finds that investors disproportionately focus on these...
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| Format: | Article |
| Language: | English |
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Elsevier
2023-12-01
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| Series: | China Journal of Accounting Research |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S1755309123000400 |
| _version_ | 1797454330771537920 |
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| author | Shujian Guo |
| author_facet | Shujian Guo |
| author_sort | Shujian Guo |
| collection | DOAJ |
| description | I show that the disclosure of mutual funds’ holdings significantly affects investors’ investment decisions. As most mutual fund websites, advertisements, and fund-trading platforms only disclose a fund’s 10 largest holdings (top-10), this study finds that investors disproportionately focus on these stocks. However, this bias does not lead to additional profit because relative to their peers, funds with good top-10 performance tend to generate poor long-term returns. I design a clean and innovative discontinuity test between the performance of the 10th and 11th portfolio holdings to examine such window dressing behavior. I find that relative to their peers, funds that are small, new, and highly active are more likely to window dress and incur greater costs if they suffer from severe capital outflows. My findings suggest that partial disclosure misleads investors and allows effective window dressing. |
| first_indexed | 2024-03-09T15:35:44Z |
| format | Article |
| id | doaj.art-1ea0013ec86f45dfa24067f6ae7f2909 |
| institution | Directory Open Access Journal |
| issn | 1755-3091 |
| language | English |
| last_indexed | 2024-03-09T15:35:44Z |
| publishDate | 2023-12-01 |
| publisher | Elsevier |
| record_format | Article |
| series | China Journal of Accounting Research |
| spelling | doaj.art-1ea0013ec86f45dfa24067f6ae7f29092023-11-26T05:12:15ZengElsevierChina Journal of Accounting Research1755-30912023-12-01164100330Partial portfolio disclosure, investors’ attention, and window dressingShujian Guo0Naveen Jindal School of Management, The University of Texas at Dallas, United StatesI show that the disclosure of mutual funds’ holdings significantly affects investors’ investment decisions. As most mutual fund websites, advertisements, and fund-trading platforms only disclose a fund’s 10 largest holdings (top-10), this study finds that investors disproportionately focus on these stocks. However, this bias does not lead to additional profit because relative to their peers, funds with good top-10 performance tend to generate poor long-term returns. I design a clean and innovative discontinuity test between the performance of the 10th and 11th portfolio holdings to examine such window dressing behavior. I find that relative to their peers, funds that are small, new, and highly active are more likely to window dress and incur greater costs if they suffer from severe capital outflows. My findings suggest that partial disclosure misleads investors and allows effective window dressing.http://www.sciencedirect.com/science/article/pii/S1755309123000400Mutual fundPortfolio disclosureInvestment decisionWindow dressing |
| spellingShingle | Shujian Guo Partial portfolio disclosure, investors’ attention, and window dressing China Journal of Accounting Research Mutual fund Portfolio disclosure Investment decision Window dressing |
| title | Partial portfolio disclosure, investors’ attention, and window dressing |
| title_full | Partial portfolio disclosure, investors’ attention, and window dressing |
| title_fullStr | Partial portfolio disclosure, investors’ attention, and window dressing |
| title_full_unstemmed | Partial portfolio disclosure, investors’ attention, and window dressing |
| title_short | Partial portfolio disclosure, investors’ attention, and window dressing |
| title_sort | partial portfolio disclosure investors attention and window dressing |
| topic | Mutual fund Portfolio disclosure Investment decision Window dressing |
| url | http://www.sciencedirect.com/science/article/pii/S1755309123000400 |
| work_keys_str_mv | AT shujianguo partialportfoliodisclosureinvestorsattentionandwindowdressing |