Pension Fund Trading and Stock Returns
65 Pages Posted: 24 Oct 2010 Last revised: 31 May 2012
There are 2 versions of this paper
Pension Fund Herding and Stock Returns
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: Suggested Citation
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