Publication Type

Journal Article

Version

Preprint

Publication Date

11-2016

Abstract

Prior studies indicate that institutional investors are informed, in the sense that their trades predict price changes. In this study we show that return predictive ability of institutions arises (after controlling for size, book-to-market, and momentum) mainly from institutional sales of hard-to-value stocks during periods of positive market sentiment. These results support the notion that these stocks tend to be overvalued during periods of bullish market sentiment, and institutions contribute to market efficiency by identifying and trading on these overpriced stocks.

Keywords

Valuation uncertainty, Market sentiment, Institutional trading

Discipline

Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Banking and Finance

Volume

72

First Page

81

Last Page

98

ISSN

0378-4266

Identifier

10.1016/j.jbankfin.2016.07.009

Publisher

Elsevier

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.jbankfin.2016.07.009

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