The Performance of Short-term Institutional Trades
52 Pages Posted: 16 Feb 2013 Last revised: 19 May 2016
Date Written: February 25, 2016
Using a database of daily institutional trades, we document that a majority of short-term institutional trades lose money. In aggregate, over 23% of round-trip trades are held for less than three months, and the returns on these trades average -3.91% (non-annualized). These losses are pervasive across all types of stocks, with the lowest returns occurring in small stocks, value stocks, and low-momentum stocks. Short-term trades lose more in more volatile markets. Across funds, the worst short-term returns accrue to funds that do the most trading, and there is no evidence of persistent skill or disposition effect in short-term institutional trades.
Keywords: Institutional trading, short-term trades, trading skill, information
JEL Classification: G11, G23
Suggested Citation: Suggested Citation