Institutional Investors and Stock Return Anomalies

54 Pages Posted: 26 Nov 2013 Last revised: 7 May 2014

See all articles by Roger M. Edelen

Roger M. Edelen

Virginia Tech

Ozgur Ince

University of South Carolina - Moore School of Business

Gregory B. Kadlec

Virginia Polytechnic Institute & State University - Pamplin College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 4, 2014

Abstract

We examine institutional investor demand for stocks that are categorized as mispriced according to twelve well-known pricing anomalies. We find that institutional demand during the year prior to anomaly portfolio formation is typically on the wrong side of the anomalies’ implied mispricing. That is, we find increases in institutional ownership for overvalued stocks and decreases in institutional ownership for undervalued stocks. Moreover, abnormal returns for all twelve anomalies are concentrated almost entirely in stocks with institutional demand on the wrong side. We consider several competing explanations for these puzzling results.

Keywords: Anomalies, Institutional Investors, Market Efficiency

JEL Classification: G10, G20, G12

Suggested Citation

Edelen, Roger M. and Ince, Ozgur S. and Kadlec, Gregory B., Institutional Investors and Stock Return Anomalies (May 4, 2014). Available at SSRN: https://ssrn.com/abstract=2359744 or http://dx.doi.org/10.2139/ssrn.2359744

Roger M. Edelen

Virginia Tech ( email )

1016 Pamplin Hall (0221)
Blacksburg, VA 24060-0221
United States

Ozgur S. Ince (Contact Author)

University of South Carolina - Moore School of Business ( email )

1014 Greene Street
Columbia, SC 29208
United States
(803) 777-4905 (Phone)

Gregory B. Kadlec

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-4316 (Phone)

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