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Why Do Hedge Funds Avoid Disclosure? Evidence from Confidential 13F Filings

Published online by Cambridge University Press:  24 September 2013

George O. Aragon ,
Michael Hertzel  and
Zhen Shi
George O. Aragon
Affiliation:
george.aragon@asu.edu, Hertzel, michael.hertzel@asu.edu, Carey School of Business, Arizona State University, PO Box 873906, Tempe, AZ 85287
Michael Hertzel
Affiliation:
george.aragon@asu.edu, Hertzel, michael.hertzel@asu.edu, Carey School of Business, Arizona State University, PO Box 873906, Tempe, AZ 85287
Zhen Shi
Affiliation:
zshi@gsu.edu, Robinson College of Business, Georgia State University, 35 Broad St, Atlanta, GA 30303.
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Abstract

We study a sample of Form 13F filings where fund advisors seek confidential treatment for some or all of their 13(f)-reportable positions. Consistent with the hypothesis that managers seek confidentiality to protect proprietary information, we find that confidential positions earn positive and significant abnormal returns over the post-filing confidential period. We also find that managers are more likely to seek confidential treatment of illiquid positions that are more susceptible to front-running. Overall, our analysis highlights important benefits of reduced disclosure that are relevant to the current policy debate on hedge fund transparency.

Information

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 48 , Issue 5 , October 2013 , pp. 1499 - 1518
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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