Institutional Investor Participation and Stock Market Anomalies

24 Pages Posted: 27 Jul 2013

See all articles by Tao Shu

Tao Shu

The Chinese University of Hong Kong, Shenzhen; Shenzhen Finance Institute

Date Written: June/July 2013

Abstract

This paper investigates the impact of institutional trading volume on stock market anomalies. The paper proposes a measure that evaluates the percentage of total trading volume of a stock accounted for by institutional trades. The empirical analyses using a large sample of firms from 1980–2005 provide strong evidence that the strength of stock market anomalies such as price momentum, post‐earnings announcement drift, the value premium, and the investment anomaly is decreasing in institutional trading volume. Additionally, the effects of institutional trading volume are stronger than those of institutional ownership, the major measure of institutional investor participation in the finance literature. These findings suggest that institutional trading significantly improves stock price efficiency.

Keywords: institutional investors, trading volume, anomalies, market efficiency

Suggested Citation

Shu, Tao, Institutional Investor Participation and Stock Market Anomalies (June/July 2013). Journal of Business Finance & Accounting, Vol. 40, Issue 5-6, pp. 695-718, 2013, Available at SSRN: https://ssrn.com/abstract=2298969 or http://dx.doi.org/10.1111/jbfa.12035

Tao Shu (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

Shenzhen Finance Institute ( email )

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