Journal of Financial Economics Vol. 92 No. 1 2009
Caught on tape: Institutional trading, stock returns, and earnings announcements
Abstract
Many questions about institutional trading can only be answered if one tracks high-frequency changes in institutional ownership. In the United States, however, institutions are only required to report their ownership quarterly in 13-F filings. We infer daily institutional trading behavior from the “tape”, the Transactions and Quotes database of the New York Stock Exchange, using a sophisticated method that best predicts quarterly 13-F data from trades of different sizes. We find that daily institutional trades are highly persistent and respond positively to recent daily returns but negatively to longer-term past daily returns. Institutional trades, particularly sells, appear to generate short-term losses—possibly reflecting institutional demand for liquidity—but longer-term profits. One source of these profits is that institutions anticipate both earnings surprises and post-earnings announcement drift. These results are different from those obtained using a standard size cutoff rule for institutional trades.
- DOI
- 10.1016/j.jfineco.2008.03.006
- Volume
- 92
- Issue
- 1
- Pages
- 66-91
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex openalex