Institutional Investors and Equity Returns: Are Short-Term Institutions Better Informed?
We show that the positive relation between institutional ownership and future stock returns documented in Gompers and Metrick (2001) is driven by short-term institutions. Furthermore, short-term institutions' trading forecasts future stock returns. This predictability does not reverse in the long run and is stronger for small and growth stocks. Short-term institutions' trading is also positively related to future earnings surprises. By contrast, long-term institutions' trading does not forecast future returns, nor is it related to future earnings news. Our results are consistent with the view that short-term institutions are better informed and they trade actively to exploit their informational advantage.
Finance and Financial Management | Portfolio and Security Analysis
Review of Financial Studies
ZHANG, Zhe (Joe) and Yan, Xuemin.
Institutional Investors and Equity Returns: Are Short-Term Institutions Better Informed?. (2009). Review of Financial Studies. 22, (2), 893-924. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/1082