Open AccessPortfolio Pumping in the Brazilian Stock Market
Author(s) -
Marcelo de Castro Orefice,
Pedro L. Valls Pereira
Publication year - 2018
Publication title -
revista brasileira de finanças
Language(s) - English
Resource type - Journals
eISSN - 1984-5146
pISSN - 1679-0731
DOI - 10.12660/rbfin.v16n3.2018.74267
Subject(s) - portfolio , passive management , stock (firearms) , excess return , fund of funds , investment (military) , business , financial economics , economics , monetary economics , econometrics , actuarial science , geography , context (archaeology) , archaeology , politics , market liquidity , law , political science
In this paper, we discuss the practice of portfolio pumping in Brazil.Although the topic is recurrent in other countries, few studies provide thisanalysis for the Brazilian case. The statistical study is elaborated inthree stages: first, we considered Brazilian investment funds' shares forthe period from September 2011 to June 2016, estimating daily excess returnsof those funds based on the Ibovespa, considering and not considering theadjusted beta of the portfolios of those funds. Our results suggest that thepractice of portfolio pumping is more frequent at the end of monthsex-semester than at the end of semesters. When we consider the beta adjustedto calculate abnormal returns of the funds, we found a greater significancefor the existence of this practice. In the second step, the funds wereordered based on their performance in the previous period (by month,semester, and year), which resulted in few relevant results for the analysisof the topic, despite what is proposed by the principal-agent problemliterature. In the last step, we analyzed the practice of portfolio pumpingin stocks traded on B3, ordering them by their participation in theportfolios and by their Market Cap. The results indicated that the stockswith greater presence in the portfolios of the investment funds have higherexcess returns at the end of the periods, reinforcing the thesis that thisincrease in stock prices in those moments may be a consequence of adeliberate action taken by the managers of those funds.