Article ID Journal Published Year Pages File Type
5088240 Journal of Banking & Finance 2016 18 Pages PDF
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.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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