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Do Big Investors’ Trades Have Predictive Power? A Note on Istanbul Stock Market

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  • Numan Ülkü
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    Abstract

    The net buying (selling) volume of the most net buyer (seller) brokers over a unit period is a widely followed piece of information in Istanbul Stock Market, which most market commentaries inaccurately refer to as “the net money in- or outflow”. It is, in fact, a proxy for big investors’ trading. In this note, we test whether this information has predictive value, whether market participants’ emphasis on this information is justified, or just an illusion. By doing so, we add to the literature on the relationship between big investors’ trading and stock returns, using a unique information set. Results suggest a significant contemporaneous association between the “net inflow” and current returns, but little predictive value

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    Bibliographic Info

    Article provided by Banking Regulation and Supervision Agency in its journal Journal of Banking and Financial Markets.

    Volume (Year): 2 (2008)
    Issue (Month): 1 ()
    Pages: 85-108

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    Handle: RePEc:bdd:journl:v:2:y:2008:i:1:p:85-108

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    Keywords: The Relationship Between Big Investors’ Trading and Returns; Predictive Value of Large Trades; Market Microstructure; Istanbul Stock Market;

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    1. Patrick J. Dennis & Deon Strickland, 2002. "Who Blinks in Volatile Markets, Individuals or Institutions?," Journal of Finance, American Finance Association, American Finance Association, vol. 57(5), pages 1923-1949, October.
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    7. Chan, Louis K. C. & Lakonishok, Josef, 1993. "Institutional trades and intraday stock price behavior," Journal of Financial Economics, Elsevier, Elsevier, vol. 33(2), pages 173-199, April.
    8. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
    9. Numan Ulku, 2001. "Behavioral Finance Theories and the Price Behavior of the ISE Around the Start of the Disinflation Programme," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, Research and Business Development Department, Borsa Istanbul, vol. 5(17), pages 93-124.
    10. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992. "The impact of institutional trading on stock prices," Journal of Financial Economics, Elsevier, Elsevier, vol. 32(1), pages 23-43, August.
    11. Lang, Larry H P & Litzenberger, Robert H & Madrigal, Vicente, 1992. "Testing Financial Market Equilibrium under Asymmetric Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(2), pages 317-48, April.
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