Internet Appendix to: Short-Term Trading and Stock Return Anomalies
Forthcoming in Review of Finance
11 Pages Posted: 15 Jul 2014
Date Written: April 10, 2014
This paper examines how the extent of short-term trading relates to the efficiency of stock prices. We employ a new duration measure based on quarterly institutional investors’ portfolio holdings, next to existing proxies such as trading volume, the percentage of transient institutions, and fund turnover. Momentum returns and subsequent returns reversal are generally much stronger for stocks held primarily by short-term investors, especially if these investors recently had superior recent performance which could make them overconfident. Our results point towards the behavioral theory in Daniel, Hirshleifer and Subrahmanyam (1998) and seem inconsistent with short-term institutions improving efficiency.
The paper "Short-Term Trading and Stock Return Anomalies: Momentum, Reversal, and Share Issuance" to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=1571191.
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