Caught on Tape: Institutional Order Flow and Stock Returns

47 Pages Posted: 28 Jul 2005

See all articles by John Y. Campbell

John Y. Campbell

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Tuomo Vuolteenaho

Arrowstreet Capital, LP; National Bureau of Economic Research (NBER)

Date Written: July 2005

Abstract

Many questions about institutional trading can only be answered if one can track high-frequency changes in institutional ownership. In the US, however, institutions are only required to report their ownership quarterly in 13-F filings. We infer daily institutional trading behavior from the "tape", the Transactions and Quotes database of the New York Stock Exchange, using both a naive approach and a sophisticated method that best matches quarterly 13-F data. Increases in our measures of institutional flows negatively predict returns, particularly when institutions are selling. We interpret this as evidence that 13-F institutions compensate more patient investors for the service of providing liquidity. We also find that both very large and very small trades signal institutional activity, while medium size trades signal activity by the rest of the market.

Suggested Citation

Campbell, John Y. and Ramadorai, Tarun and Vuolteenaho, Tuomo, Caught on Tape: Institutional Order Flow and Stock Returns (July 2005). Harvard Institute of Economic Research Discussion Paper No. 2080, Available at SSRN: https://ssrn.com/abstract=770764 or http://dx.doi.org/10.2139/ssrn.770764

John Y. Campbell (Contact Author)

Harvard University - Department of Economics ( email )

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Tarun Ramadorai

Imperial College London ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Tuomo Vuolteenaho

Arrowstreet Capital, LP ( email )

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Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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