Published:
Cambridge, Mass: National Bureau of Economic Research, May 2016
Published in:NBER working paper series ; no. w22247
Extent:
1 Online-Ressource
Language:
English
DOI:
10.3386/w22247
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Description:
Large institutional investors own an increasing share of equity markets. We conjecture that a financial market in which large institutions dominate operates differently than a market populated by smaller independent investors. To support this view, we show that funds within the same family display higher correlation in flows and investment strategies. As a result, large institutions are likely to impose greater liquidity demand on the stocks they trade. Accordingly, we find that ownership and trades by large institutions lead to higher volatility and to increased return and liquidity comovement. Moreover, during times of market turmoil, stocks with higher ownership by large institutions display significantly larger price drops