Political constraints and trading strategy in times of market stress: Evidence from the chinese national social security fund

- We examine the state sponsored investors' trading strategies during the financial crisis.
- CNSSF maintains portfolio liquidity for future social liquidity provision.
- CNSSF sell their low risk stocks first, signaling an informed investor.

We analyze the trading behavior of the Chinese National Social Security Fund (CNSSF) - a fund that operates in a highly political environment. With a particular focus on the financial crisis [2007(Q3)-2009(Q1)], we show that the CNSSF adopts a rebalancing strategy that achieves a balance between portfolio liquidity and growth.