Download This PaperWhere Do Institutional Investors Seek Shelter when Disaster Strikes? Evidence from COVID-19
66 Pages Posted: 27 Jul 2020 Last revised: 9 Nov 2020
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Where Do Institutional Investors Seek Shelter when Disaster Strikes? Evidence from COVID-19
Where Do Institutional Investors Seek Shelter When Disaster Strikes? Evidence from Covid-19
Date Written: November 1, 2020
Abstract
During the COVID-19 market crash, U.S. stocks with higher institutional ownership -- in particular, those held more by active, short-term, and more exposed institutions -- performed worse. Portfolio changes through the first quarter of 2020 reveal that institutional investors prioritized corporate financial strength over "soft" environmental and social performance. Trading data from a large discount brokerage (Robinhood) confirm that retail investors acted as liquidity providers. The effects did not reverse in the second quarter. Overall, the results suggest that when a tail risk realizes, institutional investors amplify price crashes by fire-selling and seeking shelter in "hard" measures of firm resilience.
Keywords: Cash holdings, Coronavirus, Corporate debt, COVID-19, ESG, Institutional ownership, Leverage, Pandemic, Retail investors, Robinhood, Tail risk
JEL Classification: G01, G12, G14, G32, F14
Suggested Citation: Suggested Citation
Simon Glossner
University of Virginia - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
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