The Interim Trading Skills of Institutional Investors
University of Tennessee, Knoxville
Xuemin Sterling Yan
University of Missouri - Columbia
June 10, 2010
AFA 2009 San Francisco Meetings Paper
Using a large proprietary database of institutional trades for the period 1999-2005, this paper examines the interim (i.e., intra-quarter) trading skills of institutional investors. We find strong evidence that institutional investors earn significant abnormal returns on their intra-quarter round-trip trades. Furthermore, the stocks institutions buy significantly outperform the stocks institutions sell within the quarter, suggesting that these institutions have superior skills in timing their trades. More importantly, these interim trading skills are persistent, and the persistence is driven primarily by skilled portfolio managers as opposed to unskilled managers. Our study complements prior studies that use quarterly institutional holdings data, while suggesting that these studies have likely understated the investment skills of institutional investors.
Number of Pages in PDF File: 46
Keywords: Institutional Investors, Performance, Performance Persistence, Trading Skill
JEL Classification: G10, G11, G14, G23working papers series
Date posted: March 27, 2008 ; Last revised: June 10, 2010
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