Portfolio Pumping and Managerial Structure

51 Pages Posted: 19 Sep 2012 Last revised: 31 Mar 2018

Saurin Patel

University of Western Ontario - Finance-Economics Area Group

Sergei Sarkissian

McGill University; Yerevan State University

Date Written: February 8, 2018

Abstract

Using U.S. equity mutual fund data, we show that portfolio pumping – an illegal trading activity that artificially inflates year-end and quarter-end portfolio returns – is more pronounced among single-managed than team-managed funds. The magnitude of return inflation by team-managed funds is 45% lower compared to single-managed funds at year-ends. In addition, portfolio pumping decreases as team size increases. These results are mainly driven by peer effects among teams and, in some cases, amplified by less convex flows – performance relation in team-managed funds. Our findings are robust to differences in fund governance, manager career concerns, local networks, fund-family policies, and regulation changes.

Keywords: Fund performance; Peer monitoring; Monetary incentives; Securities regulation

JEL Classification: D70, G23, K22

Suggested Citation

Patel, Saurin and Sarkissian, Sergei, Portfolio Pumping and Managerial Structure (February 8, 2018). Available at SSRN: https://ssrn.com/abstract=2149088 or http://dx.doi.org/10.2139/ssrn.2149088

Saurin Patel

University of Western Ontario - Finance-Economics Area Group ( email )

1255 Western Road
Room 2303
London, Ontario N6G 0N1
Canada
519-661-4195 (Phone)

Sergei Sarkissian (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

Yerevan State University

1 Alex Manoogian Street
Yerevan, 0025
Armenia

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