Do Mutual Funds Walk the Talk? Evidence from Fund Risk Disclosure

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ID: 314617
2026
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Abstract
Abstract We examine the informativeness of fund risk disclosure by combining fund returns and textual data. We develop a novel measure, INF, to capture the explanatory power of disclosed risks for fund returns. Average INF is 55% after controlling for market risk and remains 26–29% after excluding risks related to fund name or strategy. We explain variations in INF through disclosure costs and benefits: (1) Funds with less informative disclosures face SEC comment letters and reduced flow, (2) informative disclosures attract institutional flows, and (3) performance concerns may disincentivize disclosure. Overall, funds face trade-offs between transparency and maintaining their competitive advantage. (JEL G12)
Reference Key
openalex_W7162017181 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Jinfei Sheng, Nan Xu, Lu Zheng
Journal review of financial studies
Year 2026
DOI
10.1093/rfs/hhag020
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Keywords Keywords not found

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