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In Essay I, I examine whether investment managers of equity mutual funds engage in "Window Dressing". In setting portfolio holdings disclosure rules, the SEC intends to balance the investors' interest in more frequent portfolio holdings disclosure and the direct as well as indirect costs associated with such disclosure. I examine the effect of the regulatory framework, rules regarding market structure and institutional practices on "Window Dressing". The empirical analysis provides evidence that "Window Dressing" does not exist on any systematic basis across equity mutual funds. The analysis also shows that the current set of rules and regulation provide sufficient checks and balances to deter window dressing on a systematic basis.In Essay II, I investigate whether current rules regarding delay in disclosure adequately protect mutual fund investors' interest. Ever since the Investment Company Act of 1940 mandated portfolio holdings disclosure, the SEC has tried to strike a balance between investors' interest in portfolio holding disclosure and the costs which are ultimately borne by investors. This essay also looks at whether the delay in disclosure could be reduced from 60 to 30 days. The analysis provides strong evidence that a 60-day delay for portfolio holdings disclosure provides the appropriate balance between the desire of investors for transparent and timely disclosure and the cost incurred by making that information available to investors. The evidence also strongly suggests that a 30-day delay in disclosure is not in the best interests of mutual fund investors. |
