The Rise and Fall of Portfolio Pumping Among U.S. Mutual Funds

48 Pages Posted: 17 Feb 2009 Last revised: 7 Oct 2019

See all articles by Truong X. Duong

Truong X. Duong

Iowa State University - Department of Accounting and Finance

Felix Meschke

University of Kansas - Finance Area

Date Written: October 5, 2019

Abstract

This study examines how increased regulatory attention to portfolio pumping affects the trading behavior of U.S. mutual funds. Attention by regulators should increase the likelihood of fines and reputational damage, raising the cost of such last-minute price manipulation. Consistent with this assertion, we find that last-minute price spikes in aggregate fund indices, in fund holdings and in institutional trading around quarter-ends declined, the declines are largest around year-ends, for small-cap and better-performing funds, and occurred faster for funds headquartered near SEC regional offices. These findings suggest that increased regulatory attention reduced portfolio pumping by U.S. mutual funds.

Keywords: mutual funds, delegated portfolio management, portfolio pumping, regulation, Securities and Exchange Commission, SEC, Regulation NMS

JEL Classification: G18, G23, G28, K22

Suggested Citation

Duong, Truong X. and Meschke, Felix, The Rise and Fall of Portfolio Pumping Among U.S. Mutual Funds (October 5, 2019). Available at SSRN: https://ssrn.com/abstract=1344604 or http://dx.doi.org/10.2139/ssrn.1344604

Truong X. Duong

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States

Felix Meschke (Contact Author)

University of Kansas - Finance Area ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
(347) 433-5495 (Phone)

HOME PAGE: http://www.business.ku.edu/faculty/meschke-felix/

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