Pension Fund Trading and Stock Returns

65 Pages Posted: 24 Oct 2010 Last revised: 31 May 2012

See all articles by Russell Jame

Russell Jame

University of Kentucky - Gatton College of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 30, 2012

Abstract

Managers investing on behalf of pension plan sponsors (i.e. pension funds) face greater fiduciary responsibilities and more stringent investment mandates than mutual funds. These constraints may reduce the information content of pension fund trading. Consistent with this view, we find that the stocks most heavily bought by pension funds subsequently significantly underperform the stocks most heavily sold by pension funds. We find no such pattern for mutual funds. Moreover, we identify a subset of managers who trade on behalf of both pension plan sponsors and other clients (e.g. retail investors), and we find that their trading on behalf of plan sponsors is significantly less informative than their trading for other clients.

Keywords: Pension Funds, Stock Returns, Institutional Trading, Mutual Funds

JEL Classification: G23, G12

Suggested Citation

Jame, Russell, Pension Fund Trading and Stock Returns (May 30, 2012). Available at SSRN: https://ssrn.com/abstract=1697082 or http://dx.doi.org/10.2139/ssrn.1697082

Russell Jame (Contact Author)

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

HOME PAGE: http://russelljame.com

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