Investor Heterogeneity and Trading

European Financial Management (Forthcoming)

46 Pages Posted: 11 Feb 2010 Last revised: 22 Jul 2018

See all articles by Anzhela Knyazeva

Anzhela Knyazeva

Independent; New York University (NYU) - Leonard N. Stern School of Business

Diana Knyazeva

Independent; Securities and Exchange Commission

Leonard Kostovetsky

Carroll School of Management, Boston College

Multiple version iconThere are 2 versions of this paper

Date Written: October 24, 2017


This paper examines the impact of investor heterogeneity on trading. Institutional investors play a crucial role in the information environment of firms. We argue that heterogeneity in the information ability of institutional investors has a significant impact on trading around information releases. We propose novel measures of within-firm investor heterogeneity and find that investor heterogeneity increases abnormal trading volume around news, holding constant the average levels of investor sophistication. We also find larger spread reductions around announcements for firms with greater investor heterogeneity. The effect of investor heterogeneity on trading around news continues to hold after accounting for total institutional ownership, the presence certain types of institutional investors, and analyst coverage.

Keywords: institutional investors, investor heterogeneity, information, trading volume, spreads

JEL Classification: G10, G12, G14

Suggested Citation

Knyazeva, Anzhela and Knyazeva, Diana and Kostovetsky, Leonard, Investor Heterogeneity and Trading (October 24, 2017). European Financial Management (Forthcoming). Available at SSRN: or

Anzhela Knyazeva

Independent ( email )

No Address Available

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Diana Knyazeva (Contact Author)

Independent ( email )

No Address Available

Securities and Exchange Commission

100 F Street, NE
Washington, DC 20549
United States

Leonard Kostovetsky

Carroll School of Management, Boston College ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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