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Do ESG fund managers pump and dump the stocks in their portfolios? European evidence

Author

Listed:
  • Spyros Papathanasiou

    (National and Kapodistrian University of Athens)

  • Dimitris Kenourgios

    (National and Kapodistrian University of Athens)

  • Drosos Koutsokostas

    (National and Kapodistrian University of Athens)

Abstract

We investigate portfolio pumping around quarter-ends by ESG equity mutual funds domiciled in the largest European markets in sustainable investments, i.e., the UK, France and Germany, for the period from January 2010 to December 2022. We find strong evidence that the UK funds inflate quarter-end returns, with price spikes being stronger at year-ends; nevertheless, the magnitude of price inflation is less than that of their conventional counterparts. On the contrary, results indicate that German and French funds do not engage in portfolio pumping. The COVID-19 pandemic strengthened the propensity of fund managers to cause a profound artificial enhancement to the performance of the investment portfolio. Further analysis shows that portfolio pumping is more prominent among the worst-performing funds, funds that charge investors with lower fees and achieve a poor ESG rating. However, managers that pump fund returns do not attract significantly more flows. Our results have produced valuable insights for regulators and investors participating in ESG markets, highlighting the necessity for a rigorous surveillance of the UK ESG equity market.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:assmgt:v:25:y:2024:i:3:d:10.1057_s41260-024-00351-6
    DOI: 10.1057/s41260-024-00351-6
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    More about this item

    Keywords

    ESG equity mutual funds; Portfolio pumping; Turn-of-quarter effect; ESG score; COVID-19;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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