The Decline in Performance of Institutional Investors: Insights from Their Trade Counterparties

52 Pages Posted: 15 May 2018 Last revised: 6 Apr 2020

See all articles by Ozgur Ince

Ozgur Ince

University of South Carolina - Moore School of Business

Gregory B. Kadlec

Virginia Polytechnic Institute & State University - Pamplin College of Business

Date Written: March 31, 2020

Abstract

Academics and practitioners have long anticipated a decline in the performance of institutional investors as their holdings reach the point where they are largely trading amongst themselves. We confirm that institutional investor performance has declined over time -- but it appears unrelated to the growth in institutional ownership. Institutional growth has been gradual, whereas the only discernible feature in the time-series of institutional performance is a structural shift (drop) in 2000. Reg FD appears to be a key factor. Specifically, there was an abrupt drop in institutions’ performance trading with both individuals and firms (issuance/repurchases) following Reg FD.

Keywords: Institutional Investors, Counterparties, Individual Investors, Performance, Reg FD

JEL Classification: G23, G14

Suggested Citation

Ince, Ozgur S. and Kadlec, Gregory B., The Decline in Performance of Institutional Investors: Insights from Their Trade Counterparties (March 31, 2020). Available at SSRN: https://ssrn.com/abstract=3172301 or http://dx.doi.org/10.2139/ssrn.3172301

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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