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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.

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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