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Which institutional investor types are the most informed?

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  • Zhe Chen
  • David Forsberg
  • David R. Gallagher

Abstract

We examine the informativeness of quarterly disclosed portfolio holdings across four institutional investor types: hedge funds, mutual funds, pension funds and private banking firms. Overweight positions outperform underweight positions only for hedge funds. By decomposing holdings and stock returns, we find that hedge funds are superior to other institutional investors both at picking industries and stocks and that they are better at forecasting long‐term as well as short‐term returns. Furthermore, our results show that hedge funds, mutual funds and pension funds are able to successfully time the market. The outperformance of hedge funds is not explained by a liquidity premium.

Suggested Citation

  • Zhe Chen & David Forsberg & David R. Gallagher, 2019. "Which institutional investor types are the most informed?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 449-480, April.
    • Handle: RePEc:bla:acctfi:v:59:y:2019:i:s1:p:449-480
    DOI: 10.1111/acfi.12378
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