Portfolio pumping and managerial structure

Saurin Patel, Sergei Sarkissian

Research output: Contribution to journalArticlepeer-review

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 return inflation by team-managed funds is 45% lower than by single-managed funds at year-ends. Also, portfolio pumping decreases as team size increases. These results are 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 the SEC enforcement.
Original languageEnglish
Pages (from-to)194–226
JournalReview of Financial Studies
Volume34
Issue number1
Early online date28 Feb 2020
DOIs
Publication statusPublished - Jan 2021

Keywords

  • fund performance
  • peer monitoring
  • monetary incentives
  • securities regulation

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