Who Blinks in Volatile Markets, Individuals or Institutions?

Dice Center Working Paper No. 2000-7

38 Pages Posted: 17 Jul 2000

See all articles by Patrick J. Dennis

Patrick J. Dennis

University of Virginia - McIntire School of Commerce

Deon Strickland

Arizona State University (ASU) - Finance Department

Date Written: February 2000

Abstract

We investigate the relationship between ownership structure and the volume of trade and returns of firms on days where the absolute value of the market's return is large, defined to be two percent or more. We find three main results. First, there is an abnormally high turnover in firm's shares on these days, and this abnormal turnover is positively related to the percentage of institutional ownership in a firm. Second, the magnitude of a firm's return on these days is related to the percentage of institutional ownership. Last, we decompose insitutional ownership in ownership by mutual funds and ownership by other insitutions, and find that both the statistical and economic significance of mutual fund ownership is higher than other types of insitutional ownership in explaining these results. Taken together, these results are consistent with positive feedback herding behavior on the part of insitutions, particularly mutual funds.

JEL Classification: G23, C21

Suggested Citation

Dennis, Patrick J. and Strickland, Deon, Who Blinks in Volatile Markets, Individuals or Institutions? (February 2000). Dice Center Working Paper No. 2000-7. Available at SSRN: https://ssrn.com/abstract=227715 or http://dx.doi.org/10.2139/ssrn.227715

Patrick J. Dennis

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-4050 (Phone)

Deon Strickland (Contact Author)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://wpcarey.asu.edu/directory/stafffaculty.cfm?cobid=2168669

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