Reconcilable Differences: Momentum Trading By Institutions
Richard W. Sias
University of Arizona - Department of Finance
The Financial Review, Vol. 42, No. 1, pp. 1-22, February 2007
A growing literature evaluates the relation between lag returns and demand by institutional investors. Given that lag returns and institutional ownership are directly observable, it is surprising that previous tests yield dramatically different conclusions. This study examines differences across studies and finds that four factors account for these discrepancies: (1) value-weighting versus equal-weighting across stocks, (2) averaging versus aggregating over managers, (3) disagreement in the signs of measures of institutional demand, and (4) correlation between current capitalization and both lag returns and measures of institutional demand. Controlling for these factors, the results across different methods are remarkably uniform.
Number of Pages in PDF File: 22Accepted Paper Series
Date posted: January 12, 2007
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