37 Pages Posted: 27 May 1998
Date Written: April 1998
This paper examines the quarterly holdings of all 13(f) institutions between the third quarter of 1987 and the third quarter of 1995 in approximately 3,800 firms. We analyze the trading patterns of institutions from two perspectives. First, we explore trading at the institution-level to detect portfolio shifts in response to current and past quarter returns. Second, we examine trading at the firm-level by aggregating the portfolio holdings of all reporting institutions in a given firm. We find weak evidence that institutions add to (reduce) their positions in a security after positive (negative) returns. We find stronger evidence that entry (exit) of new institutions into (out of) firms takes place after positive (negative) returns. This evidence of momentum trading at the institution-level, does not, however, translate into momentum trading at the firm-level; indeed, it appears that momentum trading by some institutions "cancels out" contrarian trading by other institutions.
JEL Classification: G10, G11, G20
Suggested Citation: Suggested Citation
By Richard Sias