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Full-Text Articles in Business
How Smart Is Institutional Trading?, Jingi Ha, Jianfeng Hu
How Smart Is Institutional Trading?, Jingi Ha, Jianfeng Hu
Research Collection Lee Kong Chian School Of Business
We estimate daily aggregate order flow at the stock level from all institutional investors as well as for hedge funds and the other institutions separately. We achieve this by extrapolating the relation between quarterly institutional ownership in 13F filings, aggregate market order imbalance in TAQ, and a representative group of institutional investors’ transaction data. We find that the estimated institutional order imbalance has positive price impact in the short term, which reverses in the long term. The “smart” order flow from hedge funds generates greater and more persistent price impact than the “dumb” order flow from all the other institutions. …
Valuation Uncertainty, Market Sentiment And The Informativeness Of Institutional Trades, Lisa Yang, Jeremy Goh, Chiraphol N. Chiyachantana
Valuation Uncertainty, Market Sentiment And The Informativeness Of Institutional Trades, Lisa Yang, Jeremy Goh, Chiraphol N. Chiyachantana
Research Collection Lee Kong Chian School Of Business
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.
Institutional Trading Frictions, Chiraphol New Chiyachantana, Pankaj K. Jain
Institutional Trading Frictions, Chiraphol New Chiyachantana, Pankaj K. Jain
Research Collection Lee Kong Chian School Of Business
We propose and empirically examine a comprehensive measure of institutional trading frictions to include the dimensions of price impact, quantity of execution, return dynamics, speed of execution or order splitting, and trading commissions. Our empirical analysis reveals that various hidden components of institutional trading frictions such as adverse selection and clean-up costs are persistent and could add significantly to previously measured directly observable components of transaction costs. Our simultaneous system of equations accounts for the endogeniety in institutional order aggressiveness based on potentially superior information as well as order splitting strategies in the implementation stage to reduce transaction costs. Order …
Reference Point Adaptation And Disposition Effect, Chiraphol New Chiyachantana, Zongfei Yang
Reference Point Adaptation And Disposition Effect, Chiraphol New Chiyachantana, Zongfei Yang
Research Collection Lee Kong Chian School Of Business
This paper investigates the importance of reference point adaptation in the analysis of the disposition effect. We consider two exogenous factors pertinent to reference point adaptation: prior outcome and recent expectation of future outcome. We show that the incidence of the disposition effect varies in a manner consistent with reference point adaptation. Both prior outcome and recent expectation of future outcome affect the location of the reference point and have a large and significant impact on the incidence of the disposition effect. First, the disposition effect can largely be explained by investors’ inability to sufficiently adapt the reference point in …
Institutional Trading Frictions, Chiraphol New Chiyachantana, Pankaj K. Jain
Institutional Trading Frictions, Chiraphol New Chiyachantana, Pankaj K. Jain
Research Collection Lee Kong Chian School Of Business
We propose and empirically examine a comprehensive measure of institutional trading frictions to include the dimensions of price impact, quantity of execution, return dynamics, speed of execution or order splitting, and trading commissions. Our empirical analysis reveals that various hidden components of institutional trading frictions such as adverse selection and clean-up costs are persistent and could add significantly to previously measured directly observable components of transaction costs. Our simultaneous system of equations accounts for the endogeniety in institutional order aggressiveness based on potentially superior information as well as order splitting strategies in the implementation stage to reduce transaction costs. Order …
Institutional Investors And Equity Returns: Are Short-Term Institutions Better Informed?, Xuemin (Sterling) Yan, Zhe Zhang
Institutional Investors And Equity Returns: Are Short-Term Institutions Better Informed?, Xuemin (Sterling) Yan, Zhe Zhang
Research Collection Lee Kong Chian School Of Business
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.