We document strong positive correlation between changes in institutional ownership and returns measured over the same period. The result suggests that either institutional investors positive-feedback trade more than individual investors or institutional herding impacts prices more than herding by individual investors. We find evidence that both factors play a role in explaining the relation. We find no evidence, however, of return mean-reversion in the year following large changes in institutional ownership-stocks institutional investors purchase subsequently outperform those they sell. Moreover, institutional herding is positively correlated with lag returns and appears to be related to stock return momentum.HERDING AND FEEDBACK TRADING HAVE THE POTENTIAL to explain a number of financial phenomena, such as excess volatility, momentum, and reversals in stock prices. Herding is a group of investors trading in the same direction over a period of time; feedback trading involves correlation between herding and lag returns. 1 Although a recent growing body of literature is devoted to investor herding and feedback trading, extant studies take divergent paths. One path depicts individual investors as engaging in herding as a result of irrational, but systematic, responses to fads or sentiment. A second path depicts institutional investors engaging in herding as a result of agency problems, security characteristics, fads, or the manner in which information is impounded in the market.

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Using brokerage account data from China, we study investment decision making in an emerging market. We find that Chinese investors make poor trading decisions: the stocks they purchase underperform those they sell. We also find that Chinese investors suffer from three behavioral biases: (i) they tend to sell stocks that have appreciated in price, but not those that have depreciated in price, consistent with a disposition effect, acknowledging gains but not losses; (ii) they seem overconfident; and (iii) they appear to believe that past returns are indicative of future returns (a representativeness bias). In comparisons to prior findings, Chinese investors seem more overconfident than U.S. investors (i.e., the Chinese hold fewer stocks, yet trade very often) and their disposition effect appears stronger. Finally, we categorize Chinese investors based on proxy measures of experience and find that ''experienced'' investors are not always less prone to behavioral biases than are ''inexperienced'' ones. key words disposition effect; investor behavior; overconfidence; representativeness biasThis study considers the extent to which Chinese investors make poor trading decisions and exhibit three particular behavioral biases: (a) the disposition effect, (b) overconfidence, and (c) the representativeness bias. These cognitive errors are forms of heuristic simplification, which stem from the brain's tendency to make mental shortcuts rather than engaging in longer analytical processing. The tendency for people to suffer from these biases is well-established in the psychology and behavioral science literature (e.g. Disposition effectConsider the situation in which an investor wishes to sell a stock. The investor can sell a stock that has increased in price or one that has decreased in price. People avoid actions that create regret and seek actions

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We examine the operating performance of Thai firms after they go public. Overall, we find that their performance declines. We then explore the relationship between managerial ownership and the change in firm performance. We find that firms with 'low' and 'high' levels of managerial ownership experience positive relationships between managerial ownership and the change in performance (alignment-of-interest hypothesis), while firms with 'intermediate' levels of managerial ownership exhibit a negative relationship between managerial ownership and the change in performance (entrenchment hypothesis). Examining the operating performance of IPO firms from an emerging market and finding a curvilinear relationship between managerial ownership and the post-IPO change in performance represents two significant contributions to the IPO literature. D

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