Changes in Ownership Breadth and Capital Market Anomalies

Journal of Portfolio Management, Forthcoming

28 Pages Posted: 19 Jun 2017 Last revised: 7 Jun 2021

See all articles by Yangru Wu

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics

Weike Xu

Clemson University - Department of Finance

Date Written: May 22, 2021

Abstract

We investigate how the interaction of entries and exits of informed institutional investors with
market anomaly signals affects strategy performance. The long legs of anomalies earn more
positive alphas following entries, while the short legs earn more negative alphas following exits.
The enhanced anomaly-based strategies of buying stocks in the long legs of anomalies with entries
and shorting stocks in the short legs with exits outperform the original anomalies with an increase
of 19-54 bps per month in the Fama-French (2015) five-factor alpha. The entries and exits of
institutional investors capture informed trading and earnings surprises thereby enhancing the
anomalies.

Keywords: Institutional investors, Capital market anomalies, Performance enhancement

JEL Classification: G23, G12

Suggested Citation

Wu, Yangru and Xu, Weike, Changes in Ownership Breadth and Capital Market Anomalies (May 22, 2021). Journal of Portfolio Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2988428 or http://dx.doi.org/10.2139/ssrn.2988428

Yangru Wu (Contact Author)

Rutgers University, Newark - School of Business - Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States
973-353-1146 (Phone)
973-353-1006 (Fax)

HOME PAGE: http://andromeda.rutgers.edu/~yangruwu

Weike Xu

Clemson University - Department of Finance ( email )

425 Sirrine Hall
Clemson, SC 29634
United States

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