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Institutional Ownership and Stock Returns

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  • Hongwei Chuang

Abstract

This paper investigates the relation between changes in institutional ownership (IO) and cross- section stock returns. By using the monthly IO data in Taiwan from 2001 to 2014, we justify the linearity covariance decomposition of Sias, Starks, and Titman 2006 and provide empirical evidence to show the short-term positive and long-term negative correlations between changes in IO and returns controlling for other characteristics of stock and double clustering standard errors. We also propose an investment strategy by ranking the stocks according to their changes in IO. The investment portfolio can generate, at least, annually 9.51% relative to the momentum strategy.

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  • Hongwei Chuang, 2015. "Institutional Ownership and Stock Returns," DSSR Discussion Papers 47, Graduate School of Economics and Management, Tohoku University.
    • Handle: RePEc:toh:dssraa:47
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    File URL: http://hdl.handle.net/10097/65022
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