The Rise and Fall of Portfolio Pumping Among U.S. Mutual Funds
48 Pages Posted: 17 Feb 2009 Last revised: 7 Oct 2019
Date Written: October 5, 2019
This study examines how increased regulatory attention to portfolio pumping affects the trading behavior of U.S. mutual funds. Attention by regulators should increase the likelihood of fines and reputational damage, raising the cost of such last-minute price manipulation. Consistent with this assertion, we find that last-minute price spikes in aggregate fund indices, in fund holdings and in institutional trading around quarter-ends declined, the declines are largest around year-ends, for small-cap and better-performing funds, and occurred faster for funds headquartered near SEC regional offices. These findings suggest that increased regulatory attention reduced portfolio pumping by U.S. mutual funds.
Keywords: mutual funds, delegated portfolio management, portfolio pumping, regulation, Securities and Exchange Commission, SEC, Regulation NMS
JEL Classification: G18, G23, G28, K22
Suggested Citation: Suggested Citation