Publication Type
Journal Article
Version
submittedVersion
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
Citation
YANG, Lisa; GOH, Jeremy; and Chiyachantana, Chiraphol N..
Valuation uncertainty, market sentiment and the informativeness of institutional trades. (2016). Journal of Banking and Finance. 72, 81-98.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5088
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jbankfin.2016.07.009