Journal ArticleDOI
Momentum Trading by Institutions
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In this article, the authors examine the trading patterns of institutions from two perspectives: the institution-level and the firm-level, and they find weak evidence that institutions add to (reduce) their positions in a security after positive (negative) returns.Abstract:
This paper examines the quarterly holdings of all 13(f) institutions between the third quarter of 1987 and the third quarter of 1995 in approximately 3,800 firms. We analyze the trading patterns of institutions from two perspectives. First, we explore trading at the institution-level to detect portfolio shifts in response to current and past quarter returns. Second, we examine trading at the firm-level by aggregating the portfolio holdings of all reporting institutions in a given firm. We find weak evidence that institutions add to (reduce) their positions in a security after positive (negative) returns. We find stronger evidence that entry (exit) of new institutions into (out of) firms takes place after positive (negative) returns. This evidence of momentum trading at the institution-level, does not, however, translate into momentum trading at the firm-level; indeed, it appears that momentum trading by some institutions "cancels out" contrarian trading by other institutions.read more
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Journal ArticleDOI
The investment behavior and performance of various investor types: a study of Finland's unique data set
Mark Grinblatt,Matti Keloharju +1 more
TL;DR: In this article, the extent to which past returns determine the propensity to buy and sell was analyzed using data from Finland, and it was shown that foreign investors tend to be momentum investors, buying past winning stocks and selling past losers.
Journal ArticleDOI
Capitalizing on Capitol Hill: Informed Trading by Hedge Fund Managers
Meng Gao,Jiekun Huang +1 more
TL;DR: This article examined the hypothesis that hedge fund managers gain an informational advantage in securities trading through their connections with lobbyists and found that hedge funds outperform passive benchmarks by 56 to 93 basis points per month on their political holdings when they are connected to lobbyists.
Journal ArticleDOI
Short-Term Institutional Herding and its Impact on Stock Prices
Andy Puckett,Xuemin Sterling Yan +1 more
TL;DR: In this paper, the authors examined the existence and impact of short-term institutional herding and found that these weekly herds significantly affect the efficiency of security prices, and that shortterm sell herds are motivated by behavioral considerations and driving asset prices away from fundamental values.
Journal ArticleDOI
Tax-Motivated Trading and Price Pressure: An Analysis of Mutual Fund Holdings
TL;DR: For example, this article found evidence of a strong "November effect" for prior losers in which funds collectively had large holdings before the 1986 Tax Reform Act (TRA) regulations became fully effective.
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Posted Content
Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior
TL;DR: This paper examined the investment strategies of 155 mutual funds over the 1975-84 period to determine the extent to which the funds purchased stocks based on their past returns, and determine the relation of this behavior to their observed portfolio performance.
Posted Content
The Distorting Effect of the Prudent-Man Laws on Institutional Equity Investments
TL;DR: The authors examined the effect of prudent man laws on the behavior of institutional investors and found that bank managers significantly tilt the composition of their portfolios toward stocks that are viewed by the courts as prudent, while mutual fund managers do not.
Posted Content
Window Dressing by Pension Fund Managers
Josef Lakonishok,Josef Lakonishok,Andrei Shleifer,Andrei Shleifer,Richard H. Thaler,Richard H. Thaler,Robert W. Vishny,Robert W. Vishny +7 more
TL;DR: In this article, the authors take a first look at investment strategies of managers of 769 pension funds, with total assets of $129 billion at the end of 1989, and show that managers of these funds tend to oversell stocks that have performed poorly.
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Positive Feedback Investment Strategies and Destabilizing Rational Speculation
J. Bradford DeLong,J. Bradford DeLong,J. Bradford DeLong,Andrei Shleifer,Andrei Shleifer,Lawrence H. Summers,Lawrence H. Summers,Robert Waldmann,Robert Waldmann +8 more
TL;DR: In this article, the role of rational speculators in financial markets was analyzed and it was shown that an increase in the number of forward-looking rational traders can lead to increased volatility of prices about fundamentals.
Posted Content
Strong Managers, Weak Owners:The Political Roots of American Corporate Finance
TL;DR: In a broad-based democracy, not all contracts will survive as discussed by the authors, if enough people dislike them, and if the average voter dislikes powerful private financial institutions, politics will, all else being equal, ban them.