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

38 Pages Posted: 22 Jul 2003  

Lilian K. Ng

York University - Schulich School of Business

Qinghai Wang

University of Central Florida - College of Business Administration

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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

Ng, Lilian K. 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

Lilian K. Ng (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Qinghai Wang

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

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