Short-Term Trading and Stock Return Anomalies: Momentum, Reversal, and Share Issuance
University of Notre Dame
April 17, 2014
AFA 2011 Denver Meetings Paper
This paper examines how the extent of short-term trading relates to the efficiency of stock prices. We employ a new duration measure based on quarterly institutional investors’ portfolio holdings, next to existing proxies such as trading volume, the percentage of transient institutions, and fund turnover. Momentum returns and subsequent returns reversal are generally much stronger for stocks held primarily by short-term investors, especially if these investors recently had superior recent performance which could make them overconfident. Our results point towards the behavioral theory in Daniel, Hirshleifer and Subrahmanyam (1998) and seem inconsistent with short-term institutions improving efficiency.
Number of Pages in PDF File: 73
Keywords: stock holding duration, return anomalies, institutional investors
JEL Classification: G12, G14working papers series
Date posted: March 17, 2010 ; Last revised: April 17, 2014
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