Volatility and Institutional Investor Holdings in a Declining Market: A Study of NASDAQ During the Year 2000
11 Pages Posted: 6 Jan 2005
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: Suggested Citation