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Portfolio pumping and dumping among Chinese mutual fund companies

Author

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  • Jiang, Christine
  • Wang, Xianzhen

Abstract

This study documents the engagement of Chinese mutual fund companies in year-end ranking games, in which they strategically buy and sell stocks substantially held by star funds and their competitors. Non-star funds contribute to approximately half of the buying and almost all selling. Fund companies actively participating in the game can attract more investment flows, but this comes at the cost of distorted relative performance among star funds and heightened return volatility across all involved funds. Furthermore, major holdings of star funds experience return reversals, increased idiosyncratic volatilities, and excessive trading around year-ends. The advent of FinTech platforms in mutual fund distribution amplifies these gaming behaviors.

Suggested Citation

  • Jiang, Christine & Wang, Xianzhen, 2024. "Portfolio pumping and dumping among Chinese mutual fund companies," Journal of Banking & Finance, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:jbfina:v:162:y:2024:i:c:s037842662400075x
    DOI: 10.1016/j.jbankfin.2024.107155
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