Information Content of Mutual Fund Portfolio Disclosure Defended on Friday, 9 September 2011
Academic financial economists have been keenly interested in the value of active portfolio management since the seminal paper of Jensen (1968). This book examines the information advantages that active mutual fund managers attain in financial markets through an analysis of disclosed fund holdings. Performance evaluation at the security level allows us to paint a more comprehensive picture of fund managers’ security-selection talents. The three chapters in this book constitute an empirical investigation of the information content of mutual fund portfolio disclosure. Chapter 2 examines the value of active funds’ portfolio disclosure from an outside investor’s perspective. Hypothetical copycat funds that duplicate the disclosed asset holdings of actively managed funds can generate performance that is comparable their primitive targets. More interestingly, their relative success increases after the U.S. SEC mandates more frequent portfolio disclosure. Chapter 3 studies the information content of the active portion of fund investments by creating a stock-level measure that seeks to aggregate various pieces of information scattered among active funds, as revealed through their over- and underweighting decisions. Active funds’ portfolio deviations from benchmarks can strongly and positively predict future stock returns. The findings establish a robust link between active fund investments and asset prices. Chapter 4 further explores the role that active mutual funds play in bringing about price efficiency. Active funds are able benefit from fundamental analysis and their information advantages are mainly attributed to their expertise in forecasting and processing fundamental information.
mutual funds, portfolio disclosure, information content, copycat funds, benchmark deviation, intrinsic value, mispricing, investments, fundamental analysis