Institutional Trading and the Turn-of-The-Year Effect

Ng, Lilian; Wang, Qinghai

doi:10.2139/ssrn.412183

Download This Paper

Open PDF in Browser

Add Paper to My Library

Institutional Trading and the Turn-of-The-Year Effect

38 Pages Posted: 22 Jul 2003

See all articles by Lilian Ng

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Qinghai Wang

University of Central Florida - College of Business Administration

There are 2 versions of this paper

Abstract

This study provides evidence that links institutional trading behavior directly to anomalous turn-of-the-year (TOY) return patterns of small stocks. We find that TOY trading patterns of institutions reflect strategies that are generally consistent with window-dressing and risk-shifting behaviors. Institutions sell more loser small stocks in the last quarter of the year, but buy more small stocks, both winners and losers, in the first quarter. Institutional buying (selling) of loser stocks at year-end weakens (strengthens) the TOY effect. In addition, buying of winner stocks after year-end causes a statistically-significant, though weaker, effect.

Keywords: Institutions, Window-Dressing, Risk-Shifting, Turn-of-the-Year Effect

JEL Classification: G12, G14, G20

Suggested Citation: Suggested Citation

Ng, Lilian and Wang, Qinghai, Institutional Trading and the Turn-of-The-Year Effect. Available at SSRN: https://ssrn.com/abstract=412183 or http://dx.doi.org/10.2139/ssrn.412183