Erschienen:
Cambridge University Press (CUP), 2017
Erschienen in:
Journal of Financial and Quantitative Analysis, 52 (2017) 1, Seite 143-173
Sprache:
Englisch
DOI:
10.1017/s0022109016000958
ISSN:
0022-1090;
1756-6916
Entstehung:
Anmerkungen:
Beschreibung:
Price declines over the previous quarter lead to stronger reversals across the subsequent 2 months. We explain this finding based on the dual notions that liquidity provision can influence reversals and that agents who act as de facto liquidity providers may be less active in past losers. Supporting these observations, we find that active institutions participate less in losing stocks and that the magnitude of monthly return reversals fluctuates with changes in the number of active institutional investors. Thus, we argue that fluctuations in liquidity provision with past return performance account for the link between return reversals and past returns.