Review of Financial Studies Vol. 22 No. 2 2009
Institutional Investors and Equity Returns: Are Short-term Institutions Better Informed?
Abstract
We show that the positive relation between institutional ownership and future stock returns documented in Gompers and Metrick (2001) is driven by short-term institutions. Furthermore, short-term institutions' trading forecasts future stock returns. This predictability does not reverse in the long run and is stronger for small and growth stocks. Short-term institutions' trading is also positively related to future earnings surprises. By contrast, long-term institutions' trading does not forecast future returns, nor is it related to future earnings news. Our results are consistent with the view that short-term institutions are better informed and they trade actively to exploit their informational advantage.
- DOI
- 10.1093/revfin/hhl046
- Volume
- 22
- Issue
- 2
- Pages
- 893-924
- Language
- en
- Sources
- openalex crossref