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.
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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
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