IDEAS home Printed from https://ideas.repec.org/a/oup/revfin/v17y2013i3p885-919.html
   My bibliography  Save this article

Portfolio Pumping, Trading Activity and Fund Performance

Author

Listed:
  • Sugato Bhattacharyya
  • Vikram Nanda

Abstract

We develop a model of trading by an informed fund manager compensated on the basis of her fund's Net Asset Value (NAV). We show that she has an incentive to pump her portfolio by buying securities she already holds. Pumping leads to excessive trading and hurts long-term fund performance. It also biases upward measured NAVs and contributes to closed-end fund discounts. Despite such costs, it may still be optimal to base her compensation on NAV. Copyright 2013, Oxford University Press.

Suggested Citation

  • Sugato Bhattacharyya & Vikram Nanda, 2013. "Portfolio Pumping, Trading Activity and Fund Performance," Review of Finance, European Finance Association, vol. 17(3), pages 885-919.
    • Handle: RePEc:oup:revfin:v:17:y:2013:i:3:p:885-919
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rof/rfs017
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Xiangwen & Wu, Wenfeng, 2019. "Portfolio pumping and fund performance ranking: A performance-based compensation contract perspective," Journal of Banking & Finance, Elsevier, vol. 105(C), pages 94-106.
    2. Zhe Chen & David R. Gallagher & Adrian D. Lee & Tom Smith, 2017. "Testing the effect of portfolio holdings disclosure in an environment absent of mandatory disclosure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(1), pages 113-129, March.
    3. Vladimir Atanasov & John J. Merrick & Philipp Schuster, 2023. "Mismarking in Mutual Funds," Management Science, INFORMS, vol. 69(2), pages 1275-1300, February.
    4. Duong, Truong X. & Meschke, Felix, 2020. "The rise and fall of portfolio pumping among U.S. mutual funds," Journal of Corporate Finance, Elsevier, vol. 60(C).
    5. Rösch, Dominik M. & Subrahmanyam, Avanidhar & van Dijk, Mathijs A., 2022. "Investor short-termism and real investment," Journal of Financial Markets, Elsevier, vol. 59(PB).
    6. Spyros Papathanasiou & Dimitris Kenourgios & Drosos Koutsokostas, 2024. "Do ESG fund managers pump and dump the stocks in their portfolios? European evidence," Journal of Asset Management, Palgrave Macmillan, vol. 25(3), pages 245-260, May.
    7. Jiang, Christine & Wang, Xianzhen, 2024. "Portfolio pumping and dumping among Chinese mutual fund companies," Journal of Banking & Finance, Elsevier, vol. 162(C).
    8. Saurin Patel & Sergei Sarkissian & Lauren Cohen, 0. "Portfolio Pumping and Managerial Structure," Review of Economic Studies, Oxford University Press, vol. 34(1), pages 194-226.
    9. Xu, Hedong & Tian, Cunzhi & Xiao, Xinrong & Fan, Suohai, 2018. "Evolutionary investors’ power-based game on networks," Applied Mathematics and Computation, Elsevier, vol. 330(C), pages 125-133.
    10. Ouyang, Liangyi & Cao, Bolong, 2020. "Selective pump-and-dump: The manipulation of their top holdings by Chinese mutual funds around quarter-ends," Emerging Markets Review, Elsevier, vol. 44(C).
    11. Ching-Chang Wang & Jerry Yu, 2018. "The holdings markup behavior of mutual funds: evidence from an emerging market," Review of Quantitative Finance and Accounting, Springer, vol. 50(2), pages 393-414, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:revfin:v:17:y:2013:i:3:p:885-919. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/eufaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.