Institutional Investor Participation and Stock Market Anomalies

38 Pages Posted: 14 Mar 2006 Last revised: 30 Oct 2012

See all articles by Tao Shu

Tao Shu

The Chinese University of Hong Kong, Shenzhen; Shenzhen Finance Institute

Date Written: Oct 30, 2012

Abstract

This paper investigates the impact of institutional trading volume on stock market anomalies. I construct a measure that evaluates the percentage of total trading volume of a stock accounted for by institutional trades. Using a large sample of firms from 1980–2005, I find strong evidence that the strength of stock market anomalies such as price momentum, post-earnings announcement drift, the value premium, and the investment anomaly is decreasing in institutional trading volume. Additionally, the effects of institutional trading volume are stronger than those of institutional ownership, the major measure of institutional investor participation in the finance literature. These findings suggest that institutional trading significantly improves stock price efficiency.

Keywords: Institutional Trading Volume, Anomalies, Price Efficiency

JEL Classification: G12, G14, G20

Suggested Citation

Shu, Tao, Institutional Investor Participation and Stock Market Anomalies (Oct 30, 2012). Available at SSRN: https://ssrn.com/abstract=890656 or http://dx.doi.org/10.2139/ssrn.890656

Tao Shu (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

Shenzhen Finance Institute ( email )

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