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Transaction-level transparency and portfolio mimicking

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  • Hagenberg, Thomas C.

Abstract

This study examines whether an increase in the transparency of investment transactions facilitates portfolio mimicking. While there are reported benefits of transparency in enhancing regulatory monitoring and discipline, an increase in the transparency of investment transactions can also facilitate mimicking of peer firms’ investment strategies. I exploit an exogenous increase in the broad dissemination of transaction-level investment disclosures of U.S.-based insurers and find a significant increase in portfolio similarity at the individual security level. Increases in portfolio similarity are more pronounced in smaller, less sophisticated insurers mimicking their larger, more sophisticated peers. Shared asset positions and common exposures to risk can exacerbate collective risk across firms. Accordingly, I find that the detectable increases in portfolio similarity are positively associated with measures of systemic risk, especially in those smaller insurers mimicking their peers. This study adds to a nascent literature on portfolio mimicking and highlights a potential negative externality of increased transparency.

Suggested Citation

  • Hagenberg, Thomas C., 2025. "Transaction-level transparency and portfolio mimicking," Journal of Accounting and Economics, Elsevier, vol. 79(1).
  • Handle: RePEc:eee:jaecon:v:79:y:2025:i:1:s0165410124000430
    DOI: 10.1016/j.jacceco.2024.101713
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    More about this item

    Keywords

    Transaction-level disclosure; Transparency; Real effects; Systemic risk;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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