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Caught On Tape: Institutional Order Flow and Stock Returns

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  • John Y. Campbell
  • Tarun Ramadorai
  • Tuomo O. Vuolteenaho

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 institu- tional 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.

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Bibliographic Info

Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 2080.

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Date of creation: 2005
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Handle: RePEc:fth:harver:2080

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Citations

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Cited by:
  1. Schmeling, Maik, 2006. "Institutional and Individual Sentiment: Smart Money and Noise Trader Risk," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-337, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Campbell, John Y & Ramadorai, Tarun & Schwartz, Allie, 2007. "Caught On Tape: Institutional Trading, Stock Returns, and Earnings Announcements," CEPR Discussion Papers 6390, C.E.P.R. Discussion Papers.
  3. Boyer, Brian & Zheng, Lu, 2009. "Investor flows and stock market returns," Journal of Empirical Finance, Elsevier, vol. 16(1), pages 87-100, January.
  4. Ødegaard, Bernt Arne, 2009. "Who moves stock prices? Monthly evidence," UiS Working Papers in Economics and Finance 2009/4, University of Stavanger.
  5. Menkhoff, Lukas & Schmeling, Maik, 2008. "Local information in foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1383-1406, December.
  6. Menkhoff, Lukas & Schmeling, Maik, 2007. "Whose trades convey information? Evidence from a cross-section of traders," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-357, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.

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