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Articles 1 - 13 of 13
Full-Text Articles in Portfolio and Security Analysis
Who Profits From Trading Options?, Jianfeng Hu, Antonia Kirilova, Gilbert Seongkyu Park, Doojin. Ryu
Who Profits From Trading Options?, Jianfeng Hu, Antonia Kirilova, Gilbert Seongkyu Park, Doojin. Ryu
Research Collection Lee Kong Chian School Of Business
We use account-level transaction data to examine trading styles and profitability in a leading derivatives market. Approximately 66% of active retail investors predominantly hold simple, one-sided positions in only one class of options, whereas institutional investors are more likely to use complex strategies. Hypothesizing that the complexity of trading styles reflects investors' skills, we examine the effect of options trading styles on investment performance. We find that retail investors using simple strategies lose to the rest of the market. For both retail and institutional investors, selling volatility is the most successful strategy. We conclude that these style effects are persistent …
Mutual Fund Stewardship And The Empty Voting Problem, Jill E. Fisch
Mutual Fund Stewardship And The Empty Voting Problem, Jill E. Fisch
All Faculty Scholarship
When Roberta Karmel wrote the articles that are the subject of this symposium, she was skeptical of both the potential value of shareholder voting and the emerging involvement of institutional investors in corporate governance. In the ensuing years, both the increased role and engagement of institutional investors and the heightened importance of shareholder voting offer new reasons to take Professor Karmel’s concerns seriously. Institutional investors have taken on a broader range of issues ranging from diversity and political spending to climate change and human capital management, and their ability to influence corporate policy on these issues has become more significant. …
Preferences Of Institutional Investors: Evidence From The Arab Region, Mohamed Ahmed Magdy Elsayed
Preferences Of Institutional Investors: Evidence From The Arab Region, Mohamed Ahmed Magdy Elsayed
Theses and Dissertations
In this research, we examine the preferences of institutional investors in the Arab region. Institutional investors’ investment decisions are based on various factors or measures that are used in assessing the worthiness of a company for investment. The research uses measures for stock risk and return, financial leverage, profitability, ownership concentration and trading activity, as well as measures for company size, value, sector, and country as predictor variables for the rate of institutional ownership and analyzes the impact of these variables. Using a cross-sectional model, the research gathers evidence from the Arab region’s leading stock markets by market capitalization for …
The New Titans Of Wall Street: A Theoretical Framework For Passive Investors, Jill E. Fisch, Asaf Hamdani, Steven Davidoff Solomon
The New Titans Of Wall Street: A Theoretical Framework For Passive Investors, Jill E. Fisch, Asaf Hamdani, Steven Davidoff Solomon
All Faculty Scholarship
Passive investors — ETFs and index funds — are the most important development in modern day capital markets, dictating trillions of dollars in capital flows and increasingly owning much of corporate America. Neither the business model of passive funds, nor the way that they engage with their portfolio companies, however, is well understood, and misperceptions of both have led some commentators to call for passive investors to be subject to increased regulation and even disenfranchisement. Specifically, this literature takes a narrow view both of the market in which passive investors compete to manage customer funds and of passive investors’ participation …
Identifying Ineffective Monitors From Securities Class Action Lawsuits, Chi Shen Wei, Lei Zhang
Identifying Ineffective Monitors From Securities Class Action Lawsuits, Chi Shen Wei, Lei Zhang
Research Collection Lee Kong Chian School Of Business
We identify “ineffective” institutional monitors based on the prevalence of occurrences of securities class-action lawsuits in their overall portfolio. We find that firms with a higher representation of such institutional investors among the firms’ large shareholders have a greater likelihood of future litigation and experience more negative market reactions upon such litigation filings. These firms exhibit other unfavorable governance outcomes including poorer acquisitions and lower CEO turnover-performance sensitivity. We find suggestive evidence that ineffective monitoring may be a result of higher operational risk.
Institutional Trading During A Wave Of Corporate Scandals: 'Perfect Payday'?, Gennaro Bernile, Johan Sulaeman, Qin Wang
Institutional Trading During A Wave Of Corporate Scandals: 'Perfect Payday'?, Gennaro Bernile, Johan Sulaeman, Qin Wang
Research Collection Lee Kong Chian School Of Business
This paper examines the role of institutional trading during the option backdating scandal of 2006-2007. Unlike their inability to anticipate other corporate events, institutional investors as a group display negative abnormal trading imbalances (i.e., buy minus sell volumes) in anticipation of firm-specific backdating exposures. Consistent with informed trading, the underlying trades earn positive abnormal short- and long-term profits. Moreover, the negative abnormal imbalances are larger in magnitude when backdating is likely a more severe issue. Local institutions, in particular, display negative trading imbalances earlier in event-time and earn consistently higher trading profits than non-local institutions. Although we find some evidence …
Institutional Presence, Johan Sulaeman, Chi Shen Wei
Institutional Presence, Johan Sulaeman, Chi Shen Wei
Research Collection Lee Kong Chian School Of Business
We propose an Institutional Presence (IP) measure to capture the latent role of non-owner institutional investors who nevertheless may be observing a firm. We employ this measure to examine whether the ‘presence’ of institutional investors reduces information asymmetry in the market. Firms in areas with high institutional presence experience higher liquidity, faster information incorporation, lower costs of equity capital, and less financing frictions relative to firms in low IP areas. The results hold after controlling for firm and geographical characteristics including institutional ownership and urban locality. Our findings indicate that being in the presence of institutional investors brings tangible benefits.
Investor Diversification And The Pricing Of Idiosyncratic Risk, Fangjian Fu
Investor Diversification And The Pricing Of Idiosyncratic Risk, Fangjian Fu
Research Collection Lee Kong Chian School Of Business
Theories predict that, due to investor under-diversification, idiosyncratic risk is positively priced in expected stock returns. Empirical studies based on various methodologies yield mixed evidence. This study circumvents the debate on methodological issues and traces the pricing of idiosyncratic risk to its economic source – investor under-diversification. Assuming that institutional investors tend to hold more diversified portfolios and thus care little about idiosyncratic risk relative to individual investors, we find that the positive relation between idiosyncratic risk and stock returns is significantly stronger (weaker) in stocks that are held and traded more by individual (institutional) investors. In addition, the pricing …
Reference Point Adaptation And Disposition Effect: Evidence From Institutional Trading, Chiraphol N. Chiyachantana, Zongfei Yang
Reference Point Adaptation And Disposition Effect: Evidence From Institutional Trading, Chiraphol N. Chiyachantana, Zongfei Yang
Research Collection Lee Kong Chian School Of Business
Using a large proprietary database of institutional trades, we investigate whether, and to what extent, the dynamic adaptation of reference point translates into variations in the disposition effect, and establish three key results. First, the propensity to realize losses declines sharply with the magnitude of prior losses due to insufficient adaptation of reference point. Second, recent adverse information accelerates investors’ adaptation to price depreciation and increases investors’ willingness to realize losses. Finally, a priori of losing money in highly speculative investments decreases investors’ aversion to realize losses. Collectively, the findings suggest that both prior outcomes and recent expectations contribute to …
Institutional Investors And The Informational Efficiency Of Prices, Ekkehart Boehmer, Eric K. Kelley
Institutional Investors And The Informational Efficiency Of Prices, Ekkehart Boehmer, Eric K. Kelley
Research Collection Lee Kong Chian School Of Business
Using a broad panel of NYSE-listed stocks between 1983 and 2004, we study the relation between institutional shareholdings and the relative informational efficiency of prices, measured as deviations from a random walk. Stocks with greater institutional ownership are priced more efficiently, and we show that variation in liquidity does not drive this result. One mechanism through which prices become more efficient is institutional trading activity, even when institutions trade passively. But efficiency is also directly related to institutional holdings, even after controlling for institutional trading, analyst coverage, short selling, variation in liquidity, and firm characteristics.
The Effect Of Concentrated Institutional Portfolio On Stock Returns, Hao Li Zhang
The Effect Of Concentrated Institutional Portfolio On Stock Returns, Hao Li Zhang
Dissertations and Theses Collection (Open Access)
This paper examines whether stock return is related to the extent of portfolio concentration on the part of institutional fund managers. There is evidence that large firms are preferred for both concentrated and well-diversified funds. Also, a trading strategy based on concentrated ownership generates positive abnormal return. This implies that informational effect (implied in an increase in concentrated capital) has significant impacts and predictability on returns. Meanwhile, we do not find diversified ownership has predictability on future stock returns.
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Using a novel and detailed custody trades dataset, this paper analyzes the trading behavior of institutions. Extant studies have examined the effects of past performance on trading by retail investors, day traders, and futures floor traders. Yet very little work has been done on institutions. We find that unlike other investors, institutions take on more risk following an increase in net profit and loss. However, the responses to a gain and loss are highly asymmetric. Institutions aggressively reduce risk in the wake of losses, but only mildly increase risk in the wake of gains. This asymmetry is more pronounced for …
Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell
Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell
Research Collection Lee Kong Chian School Of Business
There is ample evidence that past performance affects the trading decisions of individual investors. This paper looks at this issue using a detailed database of currency trading decisions of institutional investors. Past performance manifestly affects currency risk-taking in this group, but the sign and magnitude of the effect runs counter to much of the existing theory and evidence. There is no evidence whatsoever of disposition effects; rather, the dominant characteristic is aggressive risk reduction in the wake of losses. This effect is more prominent later in the year, and among older and more experienced funds. A modified version of the …