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Institutional ownership and aggregate volatility risk

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  • Barinov, Alexander

Abstract

The paper shows that the difference in aggregate volatility risk can explain why several anomalies are stronger among the stocks with low institutional ownership (IO). Institutions tend to stay away from the stocks with extremely low and extremely high levels of firm-specific uncertainty because of their desire to hedge against aggregate volatility risk or exploit their competitive advantage in obtaining and processing information, coupled with the dislike of idiosyncratic risk. Thus, the spread in uncertainty measures is wider for low IO stocks, and the same is true about the differential in aggregate volatility risk.

Suggested Citation

  • Barinov, Alexander, 2017. "Institutional ownership and aggregate volatility risk," Journal of Empirical Finance, Elsevier, vol. 40(C), pages 20-38.
    • Handle: RePEc:eee:empfin:v:40:y:2017:i:c:p:20-38
    DOI: 10.1016/j.jempfin.2016.11.003
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    Cited by:

    1. AlHares, Aws & Ntim, Collins, 2017. "A Cross- country study of the effect of institutional ownership on credit ratings," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 12(4), pages 80-99.
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    4. Xiaoqiong Wang & Siqi Wei & Xiaoyang Zhu, 2024. "Economic policy uncertainty and heterogeneous institutional investor horizons," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 39-67, January.
    5. Uğurlu-Yıldırım, Ecenur & Şendeniz-Yüncü, İlkay, 2021. "Additional factor in asset-pricing: Institutional ownership," Finance Research Letters, Elsevier, vol. 40(C).

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    More about this item

    Keywords

    Aggregate volatility risk; Institutional ownership; Value effect; Idiosyncratic volatility effect; Turnover effect; Analyst disagreement effect; Anomalies;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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