scholarly journals Institutional ownership, equity return and price momentum anomaly

2011 ◽  
Vol 9 (1) ◽  
pp. 305-318
Author(s):  
Jiun-Lin Chen ◽  
Hsiao-Fen Yang
Keyword(s):  
Size Effect ◽  
Empirical Result ◽  
Positive Feedback ◽  
Institutional Investors ◽  
Institutional Ownership ◽  
Individual Investors ◽  
Institutional Trading ◽  
Price Momentum ◽  
Institutional Holdings ◽  
Momentum Profits

This paper examines whether momentum profit and institutional holdings are related. The empirical result shows that after controlled for the size effect, momentum profits are positively related to institutional holdings, especially for small-capitalization firms. Our finding confirms that institution investors tend to have positive-feedback trading in smaller firms. Furthermore, we find that the equity return is positively related to the institutional trading, which supports the hypothesis that institutional investors are better informed than individual investors.

Price Momentum in Korea and the Effect of Investors’ Trading

2019 ◽  
Vol 27 (3) ◽  
pp. 329-364
Author(s):  
Kyoim Lee
Keyword(s):  
Positive Feedback ◽  
Institutional Investors ◽  
Individual Investors ◽  
Price Setting ◽  
Medium Term ◽  
Foreign Investors ◽  
Price Momentum ◽  
Momentum Profits ◽  
Large Size ◽  
Feedback Trading

This study investigates domestic individual, institutional and foreign investors’ trading, to test Hong and Stein (1999)’s behavioral explanation that momentum profit is generated as some uninformed investors underreact to information on medium-term prices. Using Hvidkjaer (2006)’s methodology, we examine the respective investors’ trading tendencies reflected in their active price-setting orders. We analyze a special database compiling details on every transaction for the stocks listed on the KSE during 1996:12~2009:08. During 2001~2007, individual investors’ underreaction in trading large-size winner stocks contributes to positive momentum profits. They seem to induce weak negative profits to emerge in 1997~2000, too. Foreign investors underreact to small-size loser stocks, incurring positive momentum profits during 2001~2007. They engage in positive feedback trading, when they trade large-size winner stocks. This trading tendency does not seem to be based on information on firm fundamentals, as we find those winner stocks’ returns are not sustained. Institutional investors’ trading seems to be relatively in line with future returns, but evidences are not strong enough to support they are informed investors. Overall, the behavioral hypothesis on investors’ underreaction seems to explain medium-term momentum profits in Korea, but evidences differing across subsamples suggest possibility of other unknown influences.

scholarly journals Impact of Institutional Investment Pattern on Stock Volatility: A Study of BSE-30 Companies

2016 ◽  
Vol 3 (1) ◽  
Author(s):  
Harendra Singh
Keyword(s):  
Institutional Investors ◽  
Institutional Ownership ◽  
Stock Volatility ◽  
Institutional Investment ◽  
Investment Pattern ◽  
Institutional Holdings ◽  
The Mind ◽  
The Impact

<p>There are many studies found in the field of stock volatility and institutional investors. Most of the studies found an inconsistent relationship between volatility and institutional investors. It creates a curiosity in the mind of investor, whether riskier securities attract institutional investors or an increase in institutional holdings results in an increase in volatility.</p><p><br />In this paper we tried to examine the impact of institutional ownership pattern on stock volatility. We have considered BSE-30 companies and taken 5 year data from 1st January 2009 to 1st January 2014. Our result shows that institutional ownership has positive and significant impact on stock volatility.</p>

scholarly journals Board structure and institutional ownership at the time of IPO

2017 ◽  
Vol 43 (9) ◽  
pp. 950-965 ◽  
Author(s):  
Suman Neupane ◽  
Biwesh Neupane
Keyword(s):  
Institutional Investors ◽  
Critical Time ◽  
Institutional Ownership ◽  
Board Independence ◽  
Board Structure ◽  
Data Set ◽  
Content Type ◽  
Institutional Holdings ◽  
Foreign Institutional Investors ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of mandatory regulatory provisions on board structure and the influence of such board structure on institutional holdings. Design/methodology/approach The study uses unique hand-collected data set of Indian IPOs during the 2004-2012 period after the corporate governance reforms with the introduction of clause 49 in the listing agreements in 2001. Using OLS regression, the paper empirically analyses the determinants of board size and board independence at the time of the IPOs and the influence of such a board structure on shareholdings by domestic and foreign institutional investors. Findings The authors find that complying with mandatory regulatory provisions does not impede firms from structuring their boards to reflect the firms’ advising and monitoring needs. The authors also find that complying with provisions have positive implication for the firm, as firms with greater board independence appear to attract more foreign institutional investors. Originality/value To the authors’ best knowledge, this is the first study to examine the issue in a regime where regulation mandates the composition of the board of directors. The paper also extends the literature on institutional holdings by providing evidence on the impact of board structure on institutional ownership at a critical time in a firm’s life cycle when concerns for endogeneity for empirical investigations are weaker.

scholarly journals A comprehensive investigation into style momentum strategies in China

2020 ◽  
Author(s):  
Chen Su
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Short Sales ◽  
Comprehensive Investigation ◽  
Momentum Strategies ◽  
Style Investing ◽  
Price Momentum ◽  
Institutional Settings ◽  
Momentum Profits ◽  
China Stock Market

AbstractThis study conducts a comprehensive investigation into style momentum strategies—the combination of price momentum strategies based on previous medium-term returns and style investing in terms of firm characteristics—in the China stock market over the period 1994 to 2017. Although we do not find style momentum profits over the first sub-period 1994 to 2006, strong evidence shows that style momentum strategies are profitable over the second sub-period 2007 to 2017, even after controlling for trading costs and various market and firm-specific risks. Importantly, the observed style momentum in the second sub-period is distinguished from price momentum and industry momentum but could be attributed to the improved institutional settings in recent years. Specifically, the fast growth of institutional investors since 2006, along with the introduction of margin trading and short sales in 2010, provides style switchers with more efficient investment vehicles to trade an entire style in the China stock market. Finally, we find that style profits exhibit momentum in a cyclical nature; in particular, style momentum profits are negatively related to market states, implying that it is likely for institutional investors to make profits by constructing style momentum strategies when stock market experiences a major decline.

Big Fish in a Small Pond: Institutional Trading of Penny Stocks

2020 ◽  
Vol 10 (02) ◽  
pp. 2050005
Author(s):  
Wei Huang ◽  
George J. Jiang
Keyword(s):  
Institutional Investors ◽  
Poor Performance ◽  
Institutional Ownership ◽  
Steady Increase ◽  
Investment Strategies ◽  
Institutional Trading ◽  
The Past ◽  
Penny Stocks

There has been a steady increase in institutional ownership of penny stocks over the past decades. Nevertheless, we show that penny stocks bought by institutional investors significantly underperform other penny stocks in subsequent four quarters. This poor performance is mainly driven by quasi-indexers, i.e., institutions with passive and widely diversified investment strategies. In comparison, dedicated institutions, i.e., those with low turnover but large average investments in portfolio firms and a commitment to “relationship investing”, have marginally significant ability in trading penny stocks.

scholarly journals A Revisit of the Cross-Section of Overnight and Intraday Abnormal Returns: Evidence from the Japanese REIT Market

2017 ◽  
Vol 10 (1) ◽  
pp. 46 ◽  
Author(s):  
Jieting Chen ◽  
Yuichiro Kawaguchi
Keyword(s):  
Size Effect ◽  
Institutional Investors ◽  
Abnormal Returns ◽  
Real Estate Investment Trust ◽  
Individual Investors ◽  
Real Estate Investment ◽  
Empirical Results ◽  
Investor Heterogeneity ◽  
Foreign Institutional Investors ◽  
Returns On Investment

This study revisits an overnight-intraday reversal strategy that generates an abnormal excess return for a stock market. The study is the first to examine whether abnormal returns related to size effect and investment effect occur overnight or intraday in the Japanese Real Estate Investment Trust (J-REIT) market. Empirical results show that in the J-REIT market, significant positive abnormal returns on investment effect as well as size effect occur intraday, followed by reversals that negative abnormal returns occur overnight. Further empirical results reveal that foreign institutional investors and individual investors trade against domestic institutional investors, and strengthen the asymmetric intraday and overnight abnormal returns. Therefore, we support the hypothesis that investor heterogeneity can explain the overnight-intraday anomaly. Moreover, the J-REIT market responds quickly and significantly to announcements from the Bank of Japan (BOJ). The information surprise caused by BOJ’s announcements also intensifies the intraday and overnight abnormal returns in the J-REIT market.

scholarly journals Institutional Investors’ Trading Response to Stock Market Anomalies: Evidence from Korea

2020 ◽  
Vol 12 (4) ◽  
pp. 1420
Author(s):  
Jungmu Kim ◽  
Youngkyung Ok ◽  
Yuen Jung Park
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Abnormal Returns ◽  
Institutional Ownership ◽  
Institutional Trading ◽  
Market Anomalies ◽  
Arbitrage Trading ◽  
Using Data ◽  
Stock Market Anomalies ◽  
Trading Response

This study examines whether institutions are sophisticated investors that exploit stock characteristics known to predict future returns in Korea, using data from 2000 to 2018. We analyze the institutional demand, measured as a change in institutional ownership, for stocks with eight well-known anomalies as well as the future abnormal returns of institutional trading. We find that, generally, institutions do not trade consistently with stock anomaly predictions because they are reluctant to hold both highly overvalued and highly undervalued stocks. Although they use a few anomalies, they use these characteristics passively to avoid stocks known to underperform rather than to pick stocks known to outperform. Furthermore, the positive returns on long-legs are concentrated on stocks sold by institutions, while the negative returns on short-legs are concentrated on stocks bought by them. Our finding casts doubt on the widely-accepted notion that institutions are skilled investors and that institutional arbitrage trading corrects any mispricing in the market. To the contrary, institutions’ loss-averse trading behaviors cause or magnify mispricing.

Institutional Investors

2017 ◽  
Author(s):  
Alexandre Skiba ◽  
Hilla Skiba
Keyword(s):  
Behavioral Finance ◽  
Institutional Investors ◽  
Large Body ◽  
Individual Investors ◽  
Trading Behavior ◽  
Institutional Trading ◽  
Behavioral Biases ◽  
Investor Sophistication ◽  
The Common ◽  
Momentum Trading

A large body of behavioral finance literature focuses on the behavioral biases of individual investors in their trading choices. The research shows that sophistication is related to the level at which these behavioral biases influence investors’ trading choices. This chapter reviews the literature on institutional investors’ trading behavior and finds that, consistent with the level of investor sophistication, institutional investors are less subject to the common behavioral biases. However, some behavioral biases are also present in institutional trading, and more so among less sophisticated practitioners. Evidence also shows that institutional investors engage in some trading choices such as herding, momentum trading, and under-diversification, which could be symptoms of behavioral biases. Based on the reviewed research, these trading behaviors are not value reducing. Overall, evidence indicates that institutional investors are less subject to behavioral biases, making markets more efficient.

Taxes and Valuation: Evidence from Dividend Change Announcements

2007 ◽  
Vol 29 (2) ◽  
pp. 1-23 ◽  
Author(s):  
Oliver Zhen Li
Keyword(s):  
Institutional Ownership ◽  
Agency Cost ◽  
Capital Gains ◽  
Equity Valuation ◽  
Individual Investors ◽  
Institutional Trading ◽  
Tax System ◽  
Tax Effect ◽  
Dividend Tax ◽  
The U.S

Under the U.S. tax system, dividends are historically taxed at a higher rate than capital gains and thus incur a tax-related penalty. I provide evidence that the dividend tax penalty partially offsets the positive signaling and agency cost effects of dividends for fully taxable individual investors. The level of institutional ownership and the frequency of institutional trading, which proxy for the likelihood that the marginal investor is not a fully taxable individual, mitigate the negative dividend tax effect. My results support the notion that taxes impact equity valuation. I contribute to the literature by isolating dividends' negative tax effect from their positive signaling and agency cost effects.

scholarly journals Dividend Policy and Institutional Holdings: Evidence from Australia

2020 ◽  
Vol 8 (1) ◽  
pp. 12
Author(s):  
Thao Nguyen ◽  
Hui Li
Keyword(s):  
Panel Data ◽  
Institutional Investors ◽  
Institutional Ownership ◽  
Dividend Yield ◽  
Dividend Payout ◽  
Multivariate Tests ◽  
Listed Firms ◽  
Insignificant Effect ◽  
Institutional Holdings ◽  
The Relationship

This paper investigates the relationship between dividend payout and institutional ownership for all Australian listed firms in the period between 2001 and 2015. In our univariate tests, we find that institutional investors, in general, prefer dividend-paying firms more than non-paying firms, and for the dividend-paying firms in our sample, institutional investors hold more shares in the firms who pay higher dividends. We further explore the causality between dividend payout and institutional ownership in our multivariate tests with our panel data. The results show an insignificant effect of institutional ownership (dividend payout) on the future dividend payout (institutional ownership) while controlling for firms’ fundamentals, that a higher dividend yield does not attract more institutional investors and that there is no catering to Australian institutional investors.

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