Stephen J. Brown
NYU Stern School of Business
Christopher Schwarz
University of California at Irvine
Abstract:
In this paper, we examine the use of hedge funds’ 13(f) filings by market participants. While many argue disclosure could harm investment funds, we find hedge funds largely benefit from disclosure while providing little private information to the marketplace. We detect abnormal trading volume around disclosure dates and also find significant, positive abnormal returns immediately after disclosure, suggesting the presence of copy-cat traders. We also find some hedge fund companies have significant volume changes on their positions prior to their disclosures. A long-short portfolio of these companies’ expanded-contracted positions purchased prior to the disclosure date earns positive, significant abnormal returns through the disclosure period. Finally, we find no evidence disclosed holdings offer long-term investors access to profitable information.
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