This study demonstrates that Chinese stock pension funds have similar investment preferences to mutual funds (pensions and mutual funds are managed by the same group of fund managers) but consistently underperform (outperform) their mutual fund counterparts in growth (value) stock investing. We call this contradiction China’s pension fund puzzle. To solve this puzzle, we provide evidence that stocks with low pension fund ownership have undertaken high price manipulation risks and should be compensated by a risk manipulation premium. We designed a logit (probit) Model training method using four different datasets to train the Model. The results show that the pension fund shareholding variable significantly reduced the probability of price manipulation (logit: −6.37, t = −4.13; probit:−1.72, t = −4.63). In the asset pricing framework, we constructed a price manipulation factor and evaluate its pricing performance. The Chinese market had a significant price manipulation premium of 1.9% (t = 2.006).