Long-Term Institutional Trades and the Cross-Section of Returns
32 Pages Posted: 22 Sep 2020
Date Written: August 7, 2020
I investigate the relation between long-term institutional trades and future returns, and find that the cumulative number of shares purchased in net by financial institutions over the prior ten quarters is negatively related to future returns. A long-short portfolio constructed on this measure earns an annualized average Carhart alpha of 9.9%. Overall, I find that long-term institutional trades contain information about future returns that is not already captured by existing short-term institutional trades measures.
Keywords: Anomalies, Financial Institutions, Institutional Investors, Institutional Trades, Market Efficiency
JEL Classification: G12, G14
Suggested Citation: Suggested Citation