رفتار افزایش بهای نگهداشت صندوق های متقابل: شواهدی از بازار در حال ظهور The holdings markup behavior of mutual funds: evidence from an emerging market

1 Introduction Carhart et al. (2002) find a striking result regarding mutual fund managers’ price markup behavior at the quarter-ends and year-ends, at the time when funds’ performances are usually to be evaluated. They call this phenomenon ‘‘leaning for the tape’’, indicating that mutual fund managers intend to enhance the performance ranking of their funds right before the time when the funds are evaluated. Thus, it is in some way analogous to the situation where the runners, especially the leading ones, are competing to each other for leaning for the tape in the last few seconds in a track tournament. The findings by Carhart et al. (2002) suggest that fund managers tend to inflate quarterend portfolio prices with last-minute purchases of stocks already held. This evidence suggests that the positive correlation between fund flows and investment performance might be the major motivation inspiring managers to inflate prices of the stocks that are already in their portfolios. Instead of a mutual fund price markup at quarter-ends found by Carhart et al. (2002), we find a mutual fund stockholdings markup at the quarter-ends in Taiwan’s market. Specifically, we find that fund managers tend to increase their equity holdings at both the quarter-ends and year-end followed by immediate cut-back on the holdings in the following month. This holdings markup behavior is as striking as the price markup found by Carhart et al. (2002). Although the motivation may be the same for fund managers to engage in both of the markup behaviors, it is essentially quite different in terms of the implication and the mechanism used in reaching the goal of enhancing the portfolio performance. First of all, the price markup does not necessarily imply there will be a holdings markup. For example, fund managers may buy and sell different shares in the same time for the purpose of price markup, which may not lead to a significant change in their portfolio holdings. Since Carhart et al. (2002) do not explicitly examine whether there exist significant changes in holdings at the quarter-ends and year-end, this study tries to fill this gap by showing the existence of the holdings markup. Secondly, the price markup documented by Carhart et al. (2002) implies that fund managers engage in pushing up the share prices of the stocks that they have held in their portfolios. However, the holdings markup evidenced in this paper suggests that fund managers may also try to use new stocks in addition to the stocks already held in the fund portfolio, to temporarily enhance their portfolio performances.1