Institutional trading and share returns

Using a unique database of daily transactions from Australian equity managers, we investigate the relation between institutional trading and share returns. The 34 institutional investors included in our sample exhibit a statistically and economically significant ability to predict large capitalizati...

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Bibliographic Details
Published in:	Journal of banking & finance 2011-12, Vol.35 (12), p.3383-3399
Main Authors:	Douglas Foster, F., Gallagher, David R., Looi, Adrian
Format:	Article
Language:	eng
Subjects:	Australia Informed trading Institutional investments Institutional investors Institutional trading Investment analysis Investment policy Investment strategies Market impact Rates of return Securities trading Stock returns Stockbrokers Studies Trading behavior
Online Access:	Get full text
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Summary:	Using a unique database of daily transactions from Australian equity managers, we investigate the relation between institutional trading and share returns. The 34 institutional investors included in our sample exhibit a statistically and economically significant ability to predict large capitalization share returns for the ten days following their trades. Detailed analysis indicates that investment manager style is important in understanding the link between institutional trading and stock returns. The contemporaneous relation between institutional trading and returns depends on trade size, broker use, and investment style. We find growth-oriented managers are momentum traders, while style-neutral and value managers are contrarian.
ISSN:	0378-4266 1872-6372