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Portfolio Pumping and Managerial Structure
[Internal governance mechanisms and operational performance: Evidence from index mutual funds]

Author

Listed:
  • Saurin Patel
  • Sergei Sarkissian

Abstract

Using U.S. equity mutual fund data, we show that portfolio pumping—an illegal trading activity that artificially inflates year- and quarter-end portfolio returns—is more pronounced among single-managed funds compared with team-managed ones. 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, sometimes, amplified by less convex flow-performance relation in team-managed funds. Our findings are robust to differences in fund governance, manager career concerns, local networks, fund family policies, and changes in the SEC’s enforcement policies.

Suggested Citation

  • Saurin Patel & Sergei Sarkissian, 2021. "Portfolio Pumping and Managerial Structure [Internal governance mechanisms and operational performance: Evidence from index mutual funds]," Review of Financial Studies, Society for Financial Studies, vol. 34(1), pages 194-226.
  • Handle: RePEc:oup:rfinst:v:34:y:2021:i:1:p:194-226.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa027
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    Cited by:

    1. Yue Xu, 2021. "Spillovers of Senior Mutual Fund Managers’ Capital Raising Ability," CREATES Research Papers 2022-03, Department of Economics and Business Economics, Aarhus University.

    More about this item

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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