Institutional trading and information processing: Evidence from complicated firms and easy-to-analyze firms |
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Authors: | Dallin M Alldredge |
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Institution: | Department of Finance, Florida International University, Miami, Florida, USA |
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Abstract: | In this article, I examine institutional trading within two groups of firms with different demands on investor information processing: conglomerate firms and stand-alone firms. On average, institutional trading in conglomerate firm stocks yields significantly lower returns than institutional trading in stand-alone firm stocks. Inferior returns following institutional trading in conglomerate firm stocks persist across small and large firms. Moreover, financial institutions with a low concentration of conglomerate firms in their portfolios are more profitable in their trading. This study provides evidence that skilled institutional investors intentionally focus their information-processing efforts on easy-to-analyze firms. |
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