Effects of Passive Intensity on Aggregate Price Dynamics

We find that passive intensity (PI), measured by the passive‐linked share of total stock market trading volume, is strongly related to the overall pattern of stock price movements. A one‐standard‐deviation increase in PI is associated with an 8% higher price synchronicity. We further investigate the channels through which this relation is established by separately analyzing its impact on aggregate systematic and idiosyncratic volatility of stock returns. PI has a positive effect on systematic volatility and a negative impact on firm‐specific volatility. Consistent with the effect of passive trading on price dynamics, we find evidence that PI is negatively associated with mutual funds alpha dissimilarity. After controlling for market and idiosyncratic volatility, a one‐standard‐deviation increase in PI corresponds to a 0.20% decrease in fund dissimilarity. Our findings are robust after controlling for various macro and corporate factors known to affect systematic or firm‐specific volatility.     

Foreign and Local Institutional Ownership and the Speed of Price Adjustment

Abstract:  This paper examines the relation between the speed of price adjustment and stock ownership by foreign and local institutional investors using data from the Korean stock market. We show that returns of stocks with high foreign institutional ownership lead returns of stocks with low foreign institutional ownership, especially after foreign ownership restriction is lifted. Likewise, returns of stocks with high local institutional ownership lead returns of stocks with low local institutional ownership. These results support the idea that foreign institutional (local institutional) investors have faster access to or processing power of new information than local institutional (local individual) investors.     

Institutional Ownership Type and Earnings Quality: Evidence from Iran

Institutional ownership is an important factor in corporate governance. Institutional investors play important roles in firms because of their substantial shareholdings and their capability to monitor managers. However, the question is whether they are capable of monitoring the managers. The literature has provided different evidence for the monitoring role of institutional investors. This study attempts to provide insights into the monitoring roles of institutional investors by examining the relationship between institutional ownership and earnings quality on the Tehran Stock Exchange. Institutional investors are classified into two groups, namely active institutional investors and passive institutional investors, based on their monitoring power in Iran. A multidimensional method is used to measure the various aspects of earnings quality, such as earnings response coefficient, predictive value of earnings, discretionary accruals, conservatism, and real earnings management. The results show that institutional ownership has a positive effect on earnings quality. Similar to total institutional ownership, active institutional ownership has positive effects on proxies of earnings quality. Nonetheless, passive institutional ownership does not have any power to affect earnings quality. Moreover, lead-lag tests of the direction of causality suggest that institutional ownership leads to more earnings quality and not the reverse.     

Institutional Ownership and Return Reversals Following Short‐Term Return Consistency

Securities with consistently strong positive (negative) returns during the previous two weeks have future returns that are higher (lower) than those that do not. The results hold for various robustness checks, including those involving firm size, share turnover, past return levels, and bid‐ask bounce. The returns to short horizon consistency trading strategies are reliable through time and are both economically and statistically significant. There is also some evidence that longer periods of consistency lead to greater risk‐adjusted profits. Most surprising is that this effect holds only for those firms with high institutional ownership.     

Price Comovement and Institutional Performance Following Large Market Movements

This paper investigates the price comovement of stocks actively traded by institutions and the investment performance of foreign and domestic institutional investors in Taiwan's stock markets during periods of large market movements. Stocks of small size, high share turnover, and high return volatility tend to move together with the market when markets rise sharply. In short-term holdings, foreign investors and domestic mutual funds can outperform the market by trading small-size, high-turnover, and high-volatility stocks.     

Institutional Ownership,Diversification, and Riskiness of Bank Holding Companies

We examine the relationship among the level and stability of institutional ownership, diversification, and riskiness of publicly traded bank holding companies. We find that large and stable institutional ownership is associated with a higher (lower) level of geographic, revenue, and nontraditional banking (asset) diversification and lower risk, suggesting that institutional investors are prudent and favor risk‐reducing diversification strategies. The association between institutional ownership level and diversification is more pronounced under deregulation and during the crisis, suggesting a substitution effect between regulation and market discipline, and a greater level of monitoring and/or advising by institutional investors during the crisis, respectively.     

Earnings Announcements: Good News for Institutional Investors and Short Sellers

In this paper, we consider the trading behavior of institutional investors and short sellers around earnings announcements. The results suggest that institutional investors, and to a lesser extent short sellers, successfully anticipate earnings news. In the period immediately after the earnings announcement, both types of traders are active in the market and trade in response to the earnings announcement. In particular, short sellers are quick to increase their short positions when a company releases bad news. Institutional traders also trade in response to the news; however, they take longer to react.     

Are the Insider Trades of a Large Institutional Investor Informed?

We use a unique data set to consider whether a large institution's (Fidelity funds) insider trades are informed. Theoretical studies of large informed traders suggest that their information advantage could be greater for buy trades than sell trades, be short‐ or long‐lived, and be exploited by varying the pace of trade execution. Although there is evidence of each of these, Fidelity seems to be informed only for quickly executed buy trades. Other trades outperform a stock market index but not a four‐factor return model. This performance profile is consistent with Fidelity's fees, which depend on performance compared to an index.     

机构投资者持股与股价同步性分析

本文利用中国证券市场所有A股上市公司2005～2007年的面板数据,对股价同步性和代表机构投资者持股的三个变量——机构投资者持股比例、机构投资者持股变化和持股机构投资者数量进行回归统计,检验了机构投资者持股对股价同步性的影响。研究表明,代表机构投资者持股的三个变量都与股票股价同步性显著负相关,其中机构投资者持股变化是影响股价同步性的决定性因素,其他两个变量都是通过该变量发生作用的。这一结果说明机构投资者利用公司特质信息进行的基于信息的交易提高了股价中的信息含量,降低了股价同步性。     

Price Momentum and Idiosyncratic Volatility

We find that returns to momentum investing are higher among high idiosyncratic volatility ( IVol) stocks, especially high IVol losers. Higher IVol stocks also experience quicker and larger reversals. The findings are consistent with momentum profits being attributable to underreaction to firm‐specific information and with IVol limiting arbitrage of the momentum effect. We also find a positive time‐series relation between momentum returns and aggregate IVol. Given the long‐term rise in IVol, this result helps explain the persistence of momentum profits since Jegadeesh and Titman's (1993) study.     

Foreign Institutional Investment,Ownership, and Liquidity: Real and Informational Frictions

The literature widely documents the negative liquidity impact of foreign participation in firms that permit high foreign institutional ownership. This paper employs a unique setting for the limited participation of qualified foreign institutional investors (QFIIs) in China's A-share market and examines how this impacts on stock liquidity in emerging markets. Contrary to the findings in the literature, foreign investor participation helps enhance the liquidity of affected stocks by promoting trade activities and price discovery. The improvement in liquidity does not occur through the information friction channel, but rather the real friction channel. Our results are robust to endogeneity issue and the possible influence of the global financial crisis, industry effects and the stock exchange. Further, the liquidity improving effects of QFII are even stronger when the analysis is performed on a subsample of QFII firms.     

Comovement,information production,and the business cycle

Recent theoretical research suggests that information production is a positive externality of aggregate economic activity (Veldkamp, 2005). Both the quantity and quality of information increase during periods of economic expansion and decrease during periods of contraction. Based on this insight, we hypothesize and confirm that time-varying information production drives the comovement patterns observed in stock returns. We examine stock return comovement in 36 countries from 1980 to 2007 and show that, consistent with the theory, comovement patterns are countercyclical; that is, when information production is high (low), comovement is low (high). We also find that the relation between comovement and the business cycle is stronger in countries that experience large intertemporal swings in information production. Finally, we show that the relation between business cycle and comovement is stronger in poor countries, countries with less developed financial markets, and countries with weaker accounting and transparency standards. These results suggest that financial development and transparency are conducive to a steady flow of financial information over the business cycle.     

Ownership concentration,foreign shareholding,audit quality,and stock price synchronicity: Evidence from China

This paper investigates the effects of largest-shareholder ownership concentration, foreign ownership, and audit quality on the amount of firm-specific information incorporated into share prices, as measured by stock price synchronicity, of Chinese-listed firms over the 1996–2003 period. We show that synchronicity is a concave function of ownership by the largest shareholder with its maximum at an approximate 50% level. Further, we find that synchronicity is higher when the largest shareholder is government related. We also find that foreign ownership and auditor quality are inversely associated with synchronicity. Finally, we show that the amount of earnings information reflected in stock returns is lower for firms with high synchronicity.     

Anonymity,Stealth Trading,and the Information Content of Broker Identity

This paper examines whether the identity of a broker involved in transactions contains information. Using a sample of transactions from the Australian Stock Exchange—where broker identity is transparent—we provide evidence that consecutive buyer‐/seller‐initiated transactions by the same broker have a relatively high permanent price impact. This implies that broker identity conveys information to market participants, and that markets in which broker identity is disclosed are likely to be more efficient. We also find that medium‐sized trades by the same broker convey greater information than large and small trades, which is consistent with stealth trading by informed investors.     

机构投资者、知情人交易和市场效率——来自中国资本市场的实证证据

2001年之后,我国机构投资者正经历着一个快速发展的时期。针对之前屡屡发生的违规行为,机构投资者在我国资本市场发展过程中究竟扮演了什么样的角色目前还存在很大的争议。根据Grossman与Stiglitz(1980)等研究提出的信息经济学理论,机构投资者的作用更直接的体现为通过知情人交易向市场传递信息。在以往研究的基础上,本文通过考察机构投资者交易对股价中公司特有信息含量的影响,从信息的角度对机构投资者在我国资本市场中所起到的作用进行了更进一步的检验。在控制了内生性、噪音等因素影响之后,实证结果显示机构投资者交易确实增加了股价中的公司特有信息含量,提高了市场的效率。本文加深了对我国资本市场中机构投资者的理解和认识,从更直接的角度验证了引入机构投资者对市场的作用,另一方面也在一定程度上说明监管者正确导向了机构投资者的行为。     

基于制度环境视角的非效率投资与股价崩盘风险研究

研究宏观层面的治理因子对企业非效率投资的调节作用,进而研究价格崩盘的成因。发现：较高的市场化进程、较低的政府干预程度和完善的法治环境都有助于抑制由非效率投资行为引发的股价崩盘风险。进一步的研究表明,企业非效率投资主要由代理成本而非信息不对称问题产生,进而影响价格崩盘;国有企业非效率投资对股价崩盘风险的影响大于非国有企业,但是制度环境的抑制作用对国有企业样本不明显。本文的研究结果为从宏观层面降低股价崩盘风险提供了经验证据,为维护我国股市稳定发展,推进国家治理体系建设提供了政策启示。     

Family control,multiple institutional block-holders,and informed trading

This paper investigates how large family shareholders and institutional block-holders jointly influence informed trading and firm valuation in the Hong Kong stock market. It combines market microstructure research with studies on the governance roles of multiple block-holders and finds that institutional block-holders rely on their relative controlling power vis-à-vis family owners to mitigate problems associated with informed trading. They also use their ownership rights to improve the structure of informed trading. However, these governance roles are predominantly exercised by pressure-resistant institutional block-holders. Informed trading reduces firm valuation, while an improvement in its structure increases valuation. Therefore, the governance roles of controlling families and pressure-resistant institutional block-holders may have different implications in terms of investors’ perceptions of private information risk.     

水信息披露、机构投资者与股价同步性

基于2010-2016年中国A股高水敏感行业的322家上市公司数据,实证检验水信息披露对股价同步性的影响,以及机构投资者的调节效应。研究表明：水信息披露对股价同步性的影响呈倒U型,且在民营企业样本中尤其显著。在国有企业样本中,机构投资者的加入能促使水信息披露更好地融入股价;在民营企业样本中,只有在高水信息披露水平下,机构投资者才能更好地发挥调节作用。