Portfolio Pumping in Mutual Fund Families

56 Pages Posted: 18 Mar 2017 Last revised: 6 Feb 2024

See all articles by Pingle Wang

Pingle Wang

University of Texas at Dallas, Naveen Jindal School of Management, Department of Finance

Date Written: May 30, 2018

Abstract

This paper investigates portfolio pumping at the fund family level, where non-star fund managers strategically purchase stocks held by star funds in the family to inflate their quarter-end performance. Star funds that engage in such activities show inflated performance after 2002 when the Securities and Exchange Commission increased regulation on portfolio pumping. Stocks pumped by the strategy show strong reversals at the quarter end. Moreover, despite a minor underperformance stemming from portfolio misallocation, non-star fund managers pumping for star funds receive abnormally high subsequent flows, suggesting a pattern of family subsidization.

Keywords: Mutual Funds, Portfolio Pumping, Family Strategy

JEL Classification: G18, G23, G28, K22

Suggested Citation

Wang, Pingle, Portfolio Pumping in Mutual Fund Families (May 30, 2018). Fifth Annual Conference on Financial Market Regulation, Available at SSRN: https://ssrn.com/abstract=2933600 or http://dx.doi.org/10.2139/ssrn.2933600

Pingle Wang (Contact Author)

University of Texas at Dallas, Naveen Jindal School of Management, Department of Finance ( email )

800 West Campbell
Richarson, TX 75080
United States

HOME PAGE: http://www.wangpingle.com

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