Institutional Investorsâ€™ Investment Durations and Stock Return Anomalies: Momentum, Reversal, Accruals, Share Issuance and R&D Increases
AbstractThis paper examines the effect of institutional investors? investment duration on the efficiency of stock prices. Using a new duration measure based on quarterly institutional investors? portfolio holdings, the presence of short-term institutional investors can help explain many of the best-known stock return anomalies, possibly because these investors are affected by behavioral biases like overconfidence. Specifically, we find that both momentum returns and subsequent returns reversal are much stronger for stocks with greater proportions of short-term institutional investors. The accruals and share issuance anomalies are also stronger for stocks held primarily by short-term institutional investors. Finally, short-term institutional investors do not seem to recognize the benefits of significant R&D increases, as they tend to under-react to these increases.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number amz2662.
Date of creation: 04 Sep 2009
Date of revision: 04 Sep 2009
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.:
- Hong, Harrison & Stein, Jeremy, 2007.
"Disagreement and the Stock Market,"
2894690, Harvard University Department of Economics.
- Ekkehart Boehmer & Eric K. Kelley, 2009. "Institutional Investors and the Informational Efficiency of Prices," Review of Financial Studies, Society for Financial Studies, vol. 22(9), pages 3563-3594, September.
- Nicholas Barberis & Andrei Shleifer & Robert W. Vishny, 1997.
"A Model of Investor Sentiment,"
NBER Working Papers
5926, National Bureau of Economic Research, Inc.
- Kothari, S.P. & Loutskina, E. & Nikolaev, V., 2006. "Agency Theory of Overvalued Equity as an Explanation for the Accrual Anomaly," Discussion Paper 2006-103, Tilburg University, Center for Economic Research.
- Hirshleifer, David & Hou, Kewei & Teoh, Siew Hong, 2006.
"The Accrual Anomaly: Risk or Mispricing?,"
Working Paper Series
2006-3, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Ikenberry, David & Lakonishok, Josef & Vermaelen, Theo, 1995.
"Market underreaction to open market share repurchases,"
Journal of Financial Economics,
Elsevier, vol. 39(2-3), pages 181-208.
- David Ikenberry & Josef Lakonishok & Theo Vermaelen, 1994. "Market Underreaction to Open Market Share Repurchases," NBER Working Papers 4965, National Bureau of Economic Research, Inc.
- Narasimhan Jegadeesh, 2001. "Profitability of Momentum Strategies: An Evaluation of Alternative Explanations," Journal of Finance, American Finance Association, vol. 56(2), pages 699-720, 04.
- Allan C. Eberhart & William F. Maxwell & Akhtar R. Siddique, 2004. "An Examination of Long-Term Abnormal Stock Returns and Operating Performance Following R&D Increases," Journal of Finance, American Finance Association, vol. 59(2), pages 623-650, 04.
- Yexiao Xu & Burton G. Malkiel, 2003. "Investigating the Behavior of Idiosyncratic Volatility," The Journal of Business, University of Chicago Press, vol. 76(4), pages 613-644, October.
- Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
- Ke, Bin & Ramalingegowda, Santhosh, 2005. "Do institutional investors exploit the post-earnings announcement drift?," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 25-53, February.
- Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
- Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, 04.
- Xuemin (Sterling) Yan & Zhe Zhang, 2009. "Institutional Investors and Equity Returns: Are Short-term Institutions Better Informed?," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 893-924, February.
- Loughran, Tim & Ritter, Jay R, 1995. " The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
- Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
- Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
- Jeffrey Pontiff & Artemiza Woodgate, 2008. "Share Issuance and Cross-sectional Returns," Journal of Finance, American Finance Association, vol. 63(2), pages 921-945, 04.
- Loughran, Tim & Vijh, Anand M, 1997. " Do Long-Term Shareholders Benefit from Corporate Acquisitions?," Journal of Finance, American Finance Association, vol. 52(5), pages 1765-90, December.
- Kent Daniel & Sheridan Titman, 2003.
"Market Reactions to Tangible and Intangible Information,"
NBER Working Papers
9743, National Bureau of Economic Research, Inc.
- Kent Daniel & Sheridan Titman, 2006. "Market Reactions to Tangible and Intangible Information," Journal of Finance, American Finance Association, vol. 61(4), pages 1605-1643, 08.
- Mashruwala, Christina & Rajgopal, Shivaram & Shevlin, Terry, 2006. "Why is the accrual anomaly not arbitraged away? The role of idiosyncratic risk and transaction costs," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 3-33, October.
- Conrad, Jennifer & Kaul, Gautam, 1998. "An Anatomy of Trading Strategies," Review of Financial Studies, Society for Financial Studies, vol. 11(3), pages 489-519.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.