Volatility and Institutional Investor Holdings in a Declining Market: A Study of NASDAQ During the Year 2000

11 Pages Posted: 6 Jan 2005

See all articles by Christophe Faugère

Christophe Faugère

Kedge Business School Bordeaux

Hany A. Shawky

State University of New York at Albany - School of Business and Center for Institutional Investment Management

Abstract

We investigate the differences in the holdings of institutional investors relative to individual investors during an eight-month period between March and November 2000, where the Nasdaq Composite index fell 46.23% in value. We find evidence that during that market decline, institutional investors held stocks with less return volatility than individual investors. Our evidence of institutional investor preference for holding lower volatility stocks in a declining market may indicate their relatively greater sensitivity to downside risk. As a consequence, institutional investors are found to perform better than individual investors during that specific time period.

JEL Classification: G12, G23

Suggested Citation

Faugère, Christophe and Shawky, Hany A., Volatility and Institutional Investor Holdings in a Declining Market: A Study of NASDAQ During the Year 2000. Journal of Applied Finance, Vol. 13, No. 2, Fall/Winter 2003. Available at SSRN: https://ssrn.com/abstract=480982

Christophe Faugère (Contact Author)

Kedge Business School Bordeaux ( email )

680 Cours de la Liberation
Bordeaux, Aquitaine 33405
France

Hany A. Shawky

State University of New York at Albany - School of Business and Center for Institutional Investment Management ( email )

School of Business
1400 Washington Ave.
Albany, NY 12222
United States
518-442-4921 (Phone)
518-442-3944 (Fax)

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