Abstract
Utilizing a database of daily institutional fund manager trades, we examine the contribution of strategic trading at quarter-end associated with potential 'portfolio pumping' or 'ramping up' of reported stock prices around quarter ends. We provide the first direct evidence that active fund managers tend to purchase illiquid stocks on the last day of the quarter, in stocks in which they already hold overweight portfolio positions. Consistent with the way fund managers are evaluated, we find the poor-performing managers display greater evidence of portfolio pumping. Both increased regulatory scrutiny and improvements to market microstructure design reduce the severity of stock price changes at quarter ends.
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