Short-Term Trading and Stock Return Anomalies: Momentum, Reversal, and Share Issuance
University of Notre Dame
April 17, 2014
Review of Finance, Forthcoming
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.
The appendices for this paper are available at the following URL: http://ssrn.com/abstract=2464597
Number of Pages in PDF File: 62
Keywords: stock holding duration, return anomalies, institutional investors
JEL Classification: G12, G14
Date posted: March 17, 2010 ; Last revised: July 12, 2014
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo5 in 0.344 seconds