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Caught on tape: Institutional trading, stock returns, and earnings announcements

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Author Info
Campbell, John Y.
Ramadorai, Tarun
Schwartz, Allie

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Abstract

Many questions about institutional trading can only be answered if one tracks high-frequency changes in institutional ownership. In the United States, 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 a sophisticated method that best predicts quarterly 13-F data from trades of different sizes. We find that daily institutional trades are highly persistent and respond positively to recent daily returns but negatively to longer-term past daily returns. Institutional trades, particularly sells, appear to generate short-term losses--possibly reflecting institutional demand for liquidity--but longer-term profits. One source of these profits is that institutions anticipate both earnings surprises and post-earnings announcement drift. These results are different from those obtained using a standard size cutoff rule for institutional trades.

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File URL: http://www.sciencedirect.com/science/article/B6VBX-4VBMNJS-2/2/9a97600ac561cac790cc76253234c17f
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Publisher Info
Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 92 (2009)
Issue (Month): 1 (April)
Pages: 66-91
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Handle: RePEc:eee:jfinec:v:92:y:2009:i:1:p:66-91

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Institutions Trading Stock returns Post-earnings announcement drift;

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Zhi Da & Pengjie Gao & Ravi Jagannathan, 2007. "When Does a Mutual Fund's Trade Reveal its Skill?," NBER Working Papers 13625, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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