Institutional investors and stock returns volatility: Empirical evidence from a natural experiment |
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Authors: | Martin T. Bohl Janusz Brzeszczyński Bernd Wilfling |
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Affiliation: | 1. Westfälische Wilhelms-Universität Münster, Department of Economics, Am Stadtgraben 9, 48143 Münster, Germany;2. Heriot-Watt University, Department of Accountancy and Finance, Edinburgh, EH14 4AS, United Kingdom |
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Abstract: | In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as a unique institutional characteristic. Performing a Markov-switching-GARCH analysis we find empirical evidence that the increase of institutional ownership has temporarily changed the volatility structure of aggregate stock returns. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional investors. |
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