Do Institutional Investors Destabilize Stock Prices? Evidence from an Emerging Market
AbstractIn 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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Bibliographic InfoPaper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 0501.
Date of creation: 2005
Date of revision:
institutional traders; Polish stock market; pension fund investors; stock market volatility; asymmetric GARCH models;
Other versions of this item:
- Bohl, Martin T. & Brzeszczynski, Janusz, 2006. "Do institutional investors destabilize stock prices? evidence from an emerging market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(4), pages 370-383, October.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-30 (All new papers)
- NEP-CFN-2005-04-30 (Corporate Finance)
- NEP-FIN-2005-04-30 (Finance)
- NEP-RMG-2005-04-30 (Risk Management)
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