Portfolio Similarity: Institutional Ownership and Asset Prices

72 Pages Posted: 9 May 2022

See all articles by Audra L. Boone

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business; European Corporate Governance Institute (ECGI)

Hursit S. Celil

Peking University - HSBC Business School

Srinivasan Selvam

Peking University - HSBC Business School

Date Written: May 5, 2022

Abstract

We examine how expertise of institutional investors (aka deft investors), based on the product market similarity of their 13F holdings, is related to asset prices. We find that portfolio similarity of investors is associated with returns both at the extensive and intensive margins. A long-short strategy that buys (sells) stocks with increases (decreases) in deft ownership earns high risk-adjusted returns. Exploring mechanisms, we find stocks that are traded by deft investors, on average, receive lower investor attention and are relatively under-valued. Our findings suggest that investors specialize in industries and enjoy an information advantage, which when not fully exploited due to investor constraints, allow stock return predictability.

Keywords: Institutional Investors, Product Market Similarity, Price discovery, Information Asymmetry

JEL Classification: G11, G12, G14, G23

Suggested Citation

Boone, Audra and Celil, Hursit S. and Selvam, Srinivasan, Portfolio Similarity: Institutional Ownership and Asset Prices (May 5, 2022). Available at SSRN: https://ssrn.com/abstract=4101584 or http://dx.doi.org/10.2139/ssrn.4101584

Audra Boone

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Hursit S. Celil

Peking University - HSBC Business School ( email )

University Town
Shenzhen, 518055
China
+8675526033096 (Phone)

Srinivasan Selvam (Contact Author)

Peking University - HSBC Business School ( email )

University Town
Shenzhen, 518055
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
104
Abstract Views
365
rank
358,534
PlumX Metrics