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Changes in Institutional Ownership and Stock Returns: Assessment and Methodology

Author

Listed:
  • Richard W. Sias

    (Washington State University)

  • Laura T. Starks

    (University of Texas)

Abstract

Although the relation between quarterly changes in institutional investor ownership and contemporaneous stock returns is well documented, the source of the relation remains unclear because institutional ownership data are unavailable at higher frequencies. In this study, we develop a method to generate estimates of higher frequency covariances when one variable is observed at lower frequencies (e.g., quarterly changes in institutional ownership and monthly stock returns). Our method provides evidence that institutional trading has both temporary and permanent price effects and that the latter is associated with information effects.

Suggested Citation

  • Richard W. Sias & Laura T. Starks, 2006. "Changes in Institutional Ownership and Stock Returns: Assessment and Methodology," The Journal of Business, University of Chicago Press, vol. 79(6), pages 2869-2910, November.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:6:p:2869-2910
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