Institutional Investor Participation and Stock Market Anomalies. (22nd July 2013)

• Record Type: Journal Article
• Authors: Shu, Tao
• Is Part Of: Journal of business finance & accounting. Volume 40:Number 5/6(2013)
• Page Start: 695
• Page End: 718
• Publication Date: 2013-07-22
• Subjects: institutional investors -- trading volume -- anomalies -- market efficiency; Finance -- Periodicals; Accounting -- Periodicals; Business -- Periodicals; 658.15
• DOI: 10.1111/jbfa.12035
• Languages: English
• ISSNs: 0306-686X

Abstract

Abstract: This paper investigates the impact of institutional trading volume on stock market anomalies. The paper proposes a measure that evaluates the percentage of total trading volume of a stock accounted for by institutional trades. The empirical analyses using a large sample of firms from 1980–2005 provide strong evidence that the strength of stock market anomalies such as price momentum, post‐earnings announcement drift, the value premium, and the investment anomaly is decreasing in institutional trading volume. Additionally, the effects of institutional trading volume are stronger than those of institutional ownership, the major measure of institutional investor participation in the finance literature. These findings suggest that institutional trading significantly improves stock price efficiency.