Institutional Clientele and Comovement

47 Pages Posted: 24 Jan 2009 Last revised: 16 May 2015

See all articles by Zheng Sun

Zheng Sun

University of California, Irvine - Paul Merage School of Business

Date Written: May 15, 2015

Abstract

Previous literature has found that stock returns comove more than fundamentals. In this paper, I document the role of institutional clienteles in generating the comovement. To define clienteles, I apply clustering algorithms to institutional holdings. I find that the majority of institutional investors can be stably clustered into a small number of clienteles. Funds within the same clientele tend to suffer correlated liquidity shocks, generating correlated order flows to the underlying stocks. As a result, stocks held by the same clientele comove excessively in trading volume and return.

Keywords: institutional holdings, stock comovement, cluster

Suggested Citation

Sun, Zheng, Institutional Clientele and Comovement (May 15, 2015). Available at SSRN: https://ssrn.com/abstract=1332201 or http://dx.doi.org/10.2139/ssrn.1332201

Zheng Sun (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

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