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Do Institutional Investors Destabilize Stock Prices? Evidence from an Emerging Market

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Author Info
Martin T. Bohl
Janusz Brzeszczynski

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Abstract

In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics in Poland. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as an unique institutional characteristic. Performing a variant of the event study methodology in an asymmetric GARCH framework we find robust empirical evidence that the increase of institutional ownership has changed the autocorrelation and volatility structure of aggregate stock returns. However, the findings do not support the hypothesis that institutional investors have destabilized stock prices. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional trading.

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Paper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 0501.

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Date of creation: 2005
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Handle: RePEc:hwe:certdp:0501

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Related research
Keywords: institutional traders; Polish stock market; pension fund investors; stock market volatility; asymmetric GARCH models;

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions

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    Other versions:
  11. Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
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    Other versions:
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  21. repec:att:wimass:19902 is not listed on IDEAS
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    Other versions:
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