Institutional Investors and the Comovement of Equity Prices

6th Annual Texas Finance Festival

48 Pages Posted: 31 Aug 2004  

Christo A. Pirinsky

US Securities & Exchange Commission

Qinghai Wang

University of Central Florida - College of Business Administration

Abstract

We find that institutional investors contribute significantly to both long-term levels and short-term changes of stock price comovement with the market. This result is only partly explained by institutional investors incorporating more systematic information into security prices than individual investors. Next, we show that institutions increase the systematic movement of a stock by increasing its comovement with other stocks of high-institutional ownership, while decreasing its comovement with stocks of low-institutional ownership. The degree of stock price comovement is also increasing in the magnitude of institutional trading and appears related to particular institutional trading activities, such as style investing. Our findings have implications for current theories on comovement and financial contagion.

Suggested Citation

Pirinsky, Christo A. and Wang, Qinghai, Institutional Investors and the Comovement of Equity Prices. 6th Annual Texas Finance Festival. Available at SSRN: https://ssrn.com/abstract=585884 or http://dx.doi.org/10.2139/ssrn.585884

Christo Angelov Pirinsky (Contact Author)

US Securities & Exchange Commission ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States
202-551-5194 (Phone)

Qinghai Wang

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

PO Box 161400
Orlando, FL 32816
United States

Paper statistics

Downloads
480
Rank
46,133
Abstract Views
2,051