Social and Behavioral Sciences Commons^™

Institutional Investors’ Ownership Stability And Their Investee Firms’ Equity Mispricing, Hamid Sakaki, Surendranath Jory, Dave Jackson

Economics and Finance Faculty Publications and Presentations

This study examines the impact of institutional investors' equity ownership stability and their investment horizon to determine the impact on their investee firms' equity mispricing. Mispricing represents the difference between a firm’s market and fundamental values. We treat institutional investors as a heterogenous group, i.e., dedicated, transient, or quasi-indexer as defined by Bushee, 1998, Bushee, 2001 since their categorization determines their trading strategy. Higher institutional ownership, higher stability in institutional investors' equity ownership, and institutional investors classified as long-term are all associated with lower equity mispricing at investee firms.